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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4)
of the Securities Exchange Act of 1934
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International Comfort Products Corporation
(Name of Subject Company)
International Comfort Products Corporation
(Name of Person(s) Filing Statement)
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ORDINARY SHARES, NO PAR VALUE PER SHARE
(Title of Class of Securities)
458978-10-3
(CUSIP Number of Class of Securities)
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David P. Cain, Esq.
Senior Vice President, General Counsel and Secretary
International Comfort Products Corporation
501 Corporate Centre Drive, Suite 200
Franklin, Tennessee 37067
(615) 771-0216
(Name, Address and Telephone Number of Person Authorized to Receive Notice and
Communications on Behalf of Person(s) Filing Statement)
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With a copy to:
Gary M. Brown, Esq.
Tuke Yopp & Sweeney, PLC
Suite 1100 NationsBank Plaza
414 Union Street
Nashville, Tennessee 37219
(615) 313-3325
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Item 1. Security and Subject Company.
The name of the subject company is International Comfort Products
Corporation, a Canadian corporation (the "Company"). The Company's registered
office is located at 1 First Canadian Place, 66th Floor, Toronto, Ontario,
Canada M5X1B8. The title of the class of equity securities to which this
Solicitation/Recommendation Statement (the "Statement") relates is the
ordinary shares, no par value per share, of the Company (the "Shares").
Item 2. Tender Offer of the Bidder.
This Statement relates to the tender offer (the "Offer") by Titan
Acquisitions, Ltd., a Canadian corporation (the "Purchaser") and a wholly-
owned subsidiary of United Technologies Corporation, a Delaware corporation
("Parent"), disclosed in a Tender Offer Statement on Schedule 14D-1, dated
June 30, 1999 (the "Schedule 14D-1"), to purchase all of the outstanding
Shares of the Company at a price of $11.75 (U.S.) per Share (the "Offer
Price"), net to the seller in cash (subject to applicable withholding of
taxes) without interest thereon, upon the terms and subject to certain
conditions set forth in the Offer to Purchase, dated June 30, 1999, and the
related Letter of Transmittal, Notice of Guaranteed Delivery and Summary
Advertisement (which, together with the Offer to Purchase, constitute the
"Offer Documents").
The Offer is being made pursuant to the Pre-Acquisition Agreement, dated as
of June 23, 1999 (the "Pre-Acquisition Agreement"), by and among the Company,
the Purchaser and Parent, a copy of which is filed herewith as Exhibit 1 to
this Statement and incorporated herein by this reference. Subject to certain
terms and conditions of the Pre-Acquisition Agreement, the Purchaser will use
its reasonable best efforts to acquire the balance of any Shares not tendered
pursuant to the Offer as soon as practicable after the consummation of the
Offer pursuant to a second stage transaction which may take the form of a
statutory arrangement, amalgamation, merger, reorganization, consolidation,
recapitalization or other type of acquisition transaction(s) (the "Second Step
Transaction").
As set forth in the Schedule 14D-1, the principal executive offices of
Parent and the Purchaser are located at One Financial Plaza, Hartford,
Connecticut 06101. A copy of the joint press release issued by the Company and
Parent on June 24, 1999 announcing the execution of the Agreement is filed
herewith as Exhibit 2 to this Statement and incorporated herein by this
reference.
Item 3. Identity and Background.
(a) The name and business address of the Company, which is the entity filing
this Statement, are set forth in Item 1 above.
(b) Except as set forth in this Item 3(b), to the knowledge of the Company,
on the date hereof, there exists no material contract, agreement, arrangement
or understanding and no actual or potential conflict of interest between the
Company or its affiliates and (i) the Company or its executive officers,
directors or affiliates or (ii) the Purchaser or its executive officers,
directors or affiliates.
In connection with the transactions contemplated by the Offer, the following
agreements were entered into: the Pre-Acquisition Agreement and the
Confidentiality Agreement, dated as of March 19, 1999, between the Company and
Parent (the "Confidentiality Agreement").
The Pre-Acquisition Agreement
The following is a summary of certain material provisions of the Pre-
Acquisition Agreement. This summary does not purport to be complete and is
qualified in its entirety by reference to the complete text of the Pre-
Acquisition Agreement, a copy of which is filed herewith as Exhibit 1 to this
Statement and incorporated herein by reference. Capitalized terms used but not
defined herein shall have the meanings set forth in the Pre-Acquisition
Agreement.
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The Offer. The Pre-Acquisition Agreement provides for the commencement of
the Offer as promptly as practicable, but in no event later than five (5)
business days after the date of the public announcement of the execution of
the Pre-Acquisition Agreement.
The Pre-Acquisition Agreement provides that the obligation of the Purchaser
to, and of Parent to cause the Purchaser to, consummate the Offer and accept
for payment, and pay for, any Shares tendered and not withdrawn pursuant to
the Offer is subject only to the conditions set forth below under "--Certain
Conditions of the Offer" (the "Offer Conditions") (any of which may be waived
in whole or in part by the Purchaser in its sole discretion). The Purchaser
expressly reserved in the Pre-Acquisition Agreement the right, subject to
applicable Securities Laws (as defined in Section 1.1 of the Pre-Acquisition
Agreement, which is filed herewith as Exhibit 1 to this Statement and
incorporated herein by reference), to modify the terms of the Offer, except
that, without the express written consent of the Company, the Purchaser shall
not (i) reduce the number of Shares subject to the Offer, (ii) reduce the
Offer Price, (iii) add to or modify the Offer Conditions, (iv) except as
provided in the next paragraph, change the expiration date of the Offer, (v)
change the form of consideration payable in the Offer or (vi) amend, alter,
add or waive any term of the Offer in any manner that is, in the opinion of
the Company, adverse to the holders of the Shares.
The Pre-Acquisition Agreement provides that, notwithstanding the foregoing,
(A) if on any scheduled expiration date of the Offer, all of the Offer
Conditions have not been satisfied or waived, the Purchaser shall, unless in
the reasonable judgment of Parent all of the Offer Conditions cannot be
satisfied or waived on or prior to December 15, 1999, from time to time,
extend the Offer for such period of time as is necessary to satisfy or fulfill
such conditions, (B) Purchaser may extend the Offer for any period required by
any rule, regulation, interpretation or position of any appropriate securities
commissions or similar regulatory authorities in Canada and each of the
provinces and territories thereof and in the United States and each of the
states thereof (the "Securities Authorities") applicable to the Offer, or to
permit the Company to cure any misrepresentation, breach or non-performance
during the time period referred to in the proviso to clause (d) of the Offer
Conditions (See "--Certain Conditions of the Offer" below), and (C) Purchaser
may extend the Offer for up to ten (10) business days (but not beyond December
15, 1999) if there has been validly tendered (and not properly withdrawn)
prior to the expiration of the Offer such number of Shares that would
constitute at least 80%, but less than 90%, of the issued and outstanding
Shares as of the date of determination. The Pre-Acquisition Agreement provides
that, subject only to the Offer Conditions, the Purchaser shall, and Parent
shall cause the Purchaser to, pay, as soon as practicable after the expiration
of the Offer, for all Shares validly tendered (and not properly withdrawn)
that Purchaser becomes obligated to accept pursuant to the Offer.
Directors. The Pre-Acquisition Agreement provides that promptly upon the
purchase by the Purchaser of outstanding Shares pursuant to the Offer, and
from time to time thereafter, Parent shall be entitled to designate such
number of directors (rounded up to the next whole number) on the board of the
directors of the Company (the "Board") as will give Parent, subject to
compliance with Section 14(f) of the United States Securities Exchange Act of
1934, as amended (the "Exchange Act"), representation equal to the product of
the total number of directors on the Board (giving effect to the directors
elected pursuant to this sentence) multiplied by the percentage that the
aggregate number of Shares beneficially owned by Parent or any affiliate of
Parent following such purchase bears to the total number of Shares then
outstanding, and the Company shall, at such time, take all actions necessary
to cause Parent's designees to be so appointed (including increasing the size
of the Board or securing the resignation of incumbent directors, or both). The
Pre-Acquisition Agreement provides that the Company shall take all actions
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder, and shall include in its Schedule 14D-9 required by the United
States Securities and Exchange Commission (the "Commission") such information
with respect to the Company and its officers and directors as is required
under Section 14(f) and Rule 14f-1 to fulfill such obligations (provided,
however, that Parent shall supply to the Company and be solely responsible for
any information with respect to Parent and its nominees, officers, directors
and affiliates required by such Section 14(f) and Rule 14f-1).
Following the appointment of Parent's designees prior to consummation of the
Second Step Transaction, any amendment of the Pre-Acquisition Agreement or of
the Company's Certificate and Articles of Continuation or By-laws (the
"Governing Documents"), any termination of the Pre-Acquisition Agreement by
the Company,
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any extension by the Company of the time for performance of any obligation or
other act of Parent under the Pre-Acquisition Agreement, or any waiver
thereof, any waiver of any condition to the obligations of the Company or any
of the Company's rights under the Pre-Acquisition Agreement or other action by
the Company shall require the concurrence of a majority of the directors of
the Company then in office who were not designated by Parent, which action
shall be deemed to constitute the action of the full Board even if such
majority does not constitute a majority of all directors then in office.
Stock Options. The Pre-Acquisition Agreement provides that the Company shall
cause the vesting of option entitlements under the International Comfort
Products Corporation Employee Stock Option Plan and the International Comfort
Products Corporation 1998 Employee Stock Option Plan (the "Stock Option
Plans") to accelerate prior to or concurrent with the expiration of the Offer,
such that all outstanding options to purchase Shares (a "Company Option") are
exercisable prior to or concurrent with the expiration of the Offer. At the
time that the Purchaser shall have acquired ownership of and paid for Shares
pursuant to the Offer (the "Effective Time"), each holder of a then
outstanding Company Option shall, in settlement thereof, be entitled to
receive from the Company, and shall be paid in full satisfaction for each
Share subject to such Company Option, an amount (subject to any applicable
withholding tax) in cash equal to the product of (i) the excess of the Offer
price over the per share exercise or purchase price of such Company Option and
(ii) the number of Shares subject to such Company Option. Upon receipt of such
consideration, each such Company Option shall be cancelled. The surrender of a
Company Option to the Company in exchange for such consideration shall be
deemed a release of any and all rights the holder had or may have had in
respect of such Company Option. The Stock Option Plans shall terminate as of
the Effective Time and any and all rights under any provisions in any other
plan, program or arrangement providing for the issuance or grant of any other
interest in respect of the capital stock of the Company or any subsidiary
thereof shall be cancelled by the Company as of the Effective Time.
Employment Agreements and Termination. In the Pre-Acquisition Agreement, the
Purchaser agreed and after the Effective Time agreed to cause the Company and
any successor to the Company to agree, to honor and comply with the terms of
any existing executive termination and severance agreements, plans or policies
of the Company and its subsidiaries. In addition, if Parent, the Purchaser or
the Company choose to terminate, whether constructively or actually, the
employment of any employees (other than for cause) of the Company or any of
its subsidiaries within one year of the completion of the Offer, notice and
severance shall be provided to such employees in accordance with the Company's
existing severance practices.
Representations and Warranties. The Pre-Acquisition Agreement contains
various customary representations and warranties of one or all of the parties
thereto, including representations by the Company with respect to the
following: (i) corporate organization, qualification and authority to do
business, (ii) corporate authority, (iii) absence of conflicts under the
Company's governing documents or material contracts and absence of
governmental or legal restrictions, (iv) authorized and outstanding capital,
(v) absence of material adverse change, (vi) absence of material undisclosed
liabilities, (vii) absence of brokerage fees, (viii) conduct of business, (ix)
absence of material misstatements in filings made with Securities Authorities,
(x) United States registration, (xi) ownership of subsidiaries, (xii) absence
of material litigation, (xiii) insurance, (xiv) absence of undisclosed
material environmental liabilities, (xv) Company benefit plans, (xvi) tax
matters, (xvii) "Year 2000" compliance, (xviii) absence of material defaults
or violations of law, and (xviv) the Company's borrowing capacity under
certain debt instruments applicable to the Company; and representations and
warranties of Parent and the Purchaser with respect to the following: (i)
organization, qualification and authority to do business, (ii) corporate
authority, (iii) absence of conflicts under the Parent's and Purchaser's
governing documents or material contracts and absence of governmental or legal
restrictions, (iv) availability of funds to pay for Shares tendered pursuant
to the Offer or acquired in any Second Step Transaction, and (v) absence of
certain litigation. None of the representations and warranties of the parties
shall survive the Effective Time or, in the case of the Company, shall survive
the acceptance of, and payment for, any Shares by the Purchaser pursuant to
the Offer.
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Conduct of Business. Under the Pre-Acquisition Agreement, the Company has
covenanted and agreed that, during the period from the date of the Pre-
Acquisition Agreement until the termination of the Pre-Acquisition Agreement,
except as otherwise contemplated by the Pre-Acquisition Agreement or to the
extent that the Purchaser shall otherwise consent in writing:
(1) the business of the Company and its subsidiaries shall be conducted
only in, and the Company and its subsidiaries shall not take any action
except in, the usual and ordinary course of business and consistent with
past practice, and the Company shall use all commercially reasonable
efforts to maintain and preserve its and its subsidiaries' business
organization, assets, employees and advantageous business relationships;
(2) the Company shall not directly or indirectly do or permit to occur
any of the following: (i) amend the Company's governing documents; (ii)
declare, set aside or pay any dividend or other distribution or payment
(whether in cash, Shares or property) in respect of its share capital;
(iii) issue, grant, sell or pledge or agree to issue, grant, sell or pledge
any Shares of the Company or its subsidiaries, or securities convertible
into or exchangeable or exercisable for, or otherwise evidencing a right to
acquire, Shares of the Company or its subsidiaries, other than Shares
issuable pursuant to the terms of Company Options outstanding on the date
of the Pre-Acquisition Agreement; (iv) redeem, purchase or otherwise
acquire any of its outstanding Shares or other securities; (v) split,
combine or classify any of its Shares; (vi) adopt a plan of liquidation or
resolutions providing for the liquidation, dissolution, merger,
consolidation or reorganization of the Company or any of its subsidiaries;
or (vii) enter into or modify any contract, agreement, commitment or
arrangement with respect to any of the foregoing, except as permitted
above;
(3) other than pursuant to commitments entered into prior to the date of
the Pre-Acquisition Agreement, neither the Company nor any of its
subsidiaries shall directly or indirectly: (i) sell, pledge, dispose of or
encumber any assets except in the ordinary course of business; (ii) acquire
(by merger, amalgamation, consolidation or acquisition of shares or assets)
any corporation, partnership or other business organization or division
thereof, or, except for investments in securities made in the ordinary
course of business, make any investment either by purchase of shares or
securities, contributions of capital (other than to subsidiaries), property
transfer, or, except in the ordinary course of business, purchase of any
property or assets of any other individual or entity; (iii) incur any
indebtedness for borrowed money or any other material liability or
obligation or issue any debt securities or assume, guarantee, endorse or
otherwise as an accommodation become responsible for, the obligations of
any other individual or entity, or make any loans or advances, except in
the ordinary course of business; (iv) except for the Officer Obligations
(defined in the Pre-Acquisition Agreement as existing written obligations
or liabilities of the Company or any of its subsidiaries to pay any amount
to its officers, directors or employees, other than for salary, bonuses
under their existing bonus arrangements and directors' fees in the ordinary
course and, without limiting the generality of the foregoing, shall include
the obligations of the Company or any of its subsidiaries to officers or
employees (1) for severance or termination payments on the change of
control of the Company pursuant to any executive involuntary severance and
termination agreements in the case of officers and pursuant to the
Company's severance policy in the case of employees, and (2) for retention
bonus payments pursuant to any retention bonus program), pay, discharge or
satisfy any material claims, liabilities or obligations other than the
payment, discharge or satisfaction in the ordinary course of business
consistent with past practice of liabilities reflected or reserved against
in its financial statements or incurred in the ordinary course of business
consistent with past practice; (v) authorize, recommend or propose any
release or relinquishment of any material contract right other than in the
ordinary course of business consistent with past practice; (vi) waive,
release, grant or transfer any rights of material value or modify or change
in any material respect any existing material license, lease, contract,
production sharing agreement, government land concession or other document,
other than in the ordinary course of business consistent with past
practice; (vii) enter into any interest rate swaps, currency swaps or any
other rate fixing agreement for a financial transaction or enter into any
call arrangement of any sort or any forward sale agreement for commodities,
other than in the ordinary course of business consistent with past
practice; (viii) authorize or propose any of the foregoing, or enter into
or modify any contract, agreement, commitment or arrangement to do any of
the foregoing; or (ix) make any capital expenditures other than in
accordance with the 1999 capital expenditure budget previously disclosed in
writing to Parent;
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(4) neither the Company nor any of its subsidiaries shall create any new
Officer Obligations and, except for payment of the existing Officer
Obligations, neither the Company nor any of its subsidiaries shall grant to
any officer or director an increase in compensation in any form, grant any
general salary increase other than in accordance with the requirements of
any existing collective bargaining or union contracts, grant to any other
employee any increase in compensation in any form other than routine
increases in the ordinary course of business consistent with past
practices, make any loan to any officer or director, or take any action
with respect to the grant of any severance or termination pay arising from
the Offer or a change of control of the Company or the entering into of any
employment agreement with, any senior officer or director, or with respect
to any increase of benefits payable under its current severance or
termination pay policies;
(5) neither the Company nor any of its subsidiaries shall adopt or amend
or make any contribution to any bonus, profit sharing, option, pension,
retirement, deferred compensation, insurance, incentive compensation, other
compensation or other similar plan, agreement, trust, fund or arrangements
for the benefit of employees, except as is necessary to comply with the law
or as required by existing provisions of any such plans, programs,
arrangements or agreements; and
(6) the Company shall use its reasonable efforts to cause its current
insurance (or re-insurance) policies not to be cancelled or terminated or
any of the coverage thereunder to lapse, unless simultaneously with such
termination, cancellation or lapse, replacement policies underwritten by
insurance and re-insurance companies of nationally recognized standing
providing coverage equal to or greater than the coverage under the
cancelled, terminated or lapsed policies for substantially similar premiums
are in full force and effect.
Shareholders Meetings for Second Step Transaction; Information
Circular. (a) The Pre-Acquisition Agreement provides that if any Second Step
Transaction requires the approval of the Company's shareholders (the "Company
Shareholder Approval"), the Company will, as soon as practicable and in
accordance with the Securities Laws, other applicable Canadian laws, the
Governing Documents and the requirements of The Toronto Stock Exchange and the
American Stock Exchange or any other regulatory authority having jurisdiction
to duly call, give notice of, convene and hold a meeting of its shareholders
(the "Shareholders Meeting") to consider and vote upon the Second Step
Transaction.
(b) The Pre-Acquisition Agreement provides that if a Shareholders Meeting is
required, the Company will mail to its shareholders an Information Circular
(which shall include such proxy or other required informational statement or
circular, as the case may be, and all related materials at the time required
to be mailed to the Company's shareholders and all amendments or supplements
thereto, if any) with respect to the Shareholders Meeting.
No Solicitation; Directors' Recommendation. (a) Pursuant to the Pre-
Acquisition Agreement, the Company has agreed to immediately cease and cause
to be terminated all existing discussions and negotiations, if any, with any
parties conducted before the date of the Pre-Acquisition Agreement with
respect to any Take-over Proposal (as defined below) and, without limitation,
shall promptly, following the execution of the Pre-Acquisition Agreement,
request the return of all confidential information provided by the Company to
all parties who have had such discussions or negotiations or who have entered
into confidentiality agreements with the Company pertaining to the sale of the
Company or a substantial portion of its assets.
(b) The Pre-Acquisition Agreement provides that neither the Company nor any
of its subsidiaries, nor any of their respective directors, officers,
employees, agents, financial advisors, counsel or other representatives shall,
directly or indirectly, (i) solicit, initiate or encourage, or enter into any
agreements or understandings with respect to, any Take-over Proposal (as
defined below) (other than from Parent and its subsidiaries and their
respective directors, officers, employees, agents, financial advisors, counsel
or other representatives) or (ii) provide any confidential information to any
person or entity (other than Parent and its affiliates) or participate in any
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discussions or negotiations relating to any such Take-over Proposal.
Notwithstanding the foregoing, if a party that has proposed a Take-over
Proposal (as defined below) that the Board determines is reasonably likely to
lead to a Superior Take-over Proposal has requested confidential information,
the Board, subject to its fiduciary obligations and entering into a suitable
confidentiality agreement with such party, may provide to such party the same
information as has been provided to Parent and may consider and negotiate a
Superior Take-over Proposal. Neither the Company nor the Board, however, may
approve, make a recommendation to the Company's shareholders or enter into an
agreement with respect to a Superior Take-over Proposal unless the Pre-
Acquisition Agreement has been previously terminated. The Company also is
prohibited from waiving the "standstill" provisions applicable to any
confidentiality agreement to which it is a party (except with respect to
Parent).
For purposes of the Pre-Acquisition Agreement, "Take-over Proposal" means,
with respect to the Company or its subsidiaries or their assets, any proposal
or offer regarding any take-over bid, merger, consolidation, amalgamation,
arrangement, sale of a material amount of assets, sale of treasury shares
(other than pursuant to options under the Stock Option Plans) or other
business combination or similar transaction. "Superior Take-over Proposal"
means any written unsolicited Take-over Proposal (i) which, in the opinion of
the Board, after consulting with and receipt of advice from its independent
financial advisor, is more favorable to the Company's shareholders from a
financial point of view than the Offer (including, and after considering, any
adjustment to the terms and conditions proposed by Parent and Purchaser in
response to such Take-over Proposal), and (if such Take-over Proposal includes
cash as consideration) that sufficient financing commitments have been
obtained with respect to such Take-over Proposal that it reasonably expects a
transaction pursuant to such proposal could be consummated and that such
transaction is reasonably capable of being consummated without material delay
taking into account all legal, accounting, regulatory and other aspects of
such Take-over Proposal; and (ii) with respect to which Parent has received a
copy of such Take-over Proposal as executed by the party making the proposal,
at least 48 hours prior to acceptance or recommendation of such proposal by
the Board.
(c) Pursuant to the Pre-Acquisition Agreement, the Board has agreed, subject
to its fiduciary obligations and certain other conditions set forth in
subsection (d) below, to recommend acceptance of the Offer by the Company's
shareholders, provided that the Offer is not amended except in accordance with
the terms of the Pre-Acquisition Agreement. On the date the Offer Documents
are filed with the appropriate Securities Authorities, the Company has agreed
to file a directors' circular with respect to the Offer which shall comply in
all material respects with the requirements of applicable Securities Laws and
which shall contain the recommendation of acceptance of the Offer, as well as
notification of the intention of the directors of the Company to tender their
Shares pursuant to the Offer, and shall mail the directors' circular to the
Company's shareholders. The Company agreed to provide Parent with any comments
the Company or its counsel may receive from the Securities Authorities with
respect to such directors' circular promptly after the receipt of such
comments.
(d) The Pre-Acquisition Agreement provides that, in the event that a
Superior Take-over Proposal is offered or made to the Company's shareholders
or to the Company prior to the expiration of the Offer, the Board may
withdraw, modify or change any recommendation regarding the Offer if the
Board, acting in good faith, after consulting outside counsel, determines that
the directors are required to do so in order to discharge properly their
fiduciary duties under applicable law.
Regulatory Filings. (a) In the Pre-Acquisition Agreement, the parties have
agreed to (i) promptly take all actions necessary to make the filings required
of Parent, the Purchaser, the Company or any of their affiliates under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR"), and
the Competition Act (Canada), as amended, and any other similar statutes in
other jurisdictions, (ii) comply at the earliest practicable date with any
request for additional information or documentary material received by any of
the parties and their affiliates from the U.S. Department of Justice pursuant
to HSR or from the Canadian Competition Bureau pursuant to the Competition Act
(Canada), as amended, or any other governmental authority, as the case may be,
(iii) consult and cooperate in connection with any investigation or other
inquiry concerning the transactions contemplated by the Pre-Acquisition
Agreement commenced by the U.S. Federal Trade Commission (the "FTC") or the
Antitrust Division of the U.S. Department of Justice (the "Antitrust
Division") or state attorneys general or by the Canadian Competition Bureau,
as the case may be, (iv) as promptly as
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practicable, make any necessary filings under the Investment Canada Act, as
amended, or any other governmental authority, (v) as promptly as possible,
prepare and file any filings required under Securities Laws, the rules of The
Toronto Stock Exchange and the American Stock Exchange, or any other
applicable law relating to the transactions contemplated by the Pre-
Acquisition Agreement.
(b) Pursuant to the Pre-Acquisition Agreement, the parties have agreed to
promptly inform the other parties of any material communication received by
such party from the FTC, the Antitrust Division, the Canadian Competition
Bureau or any other governmental authority regarding any of the transactions
contemplated by the Pre-Acquisition Agreement. In addition, Parent and the
Purchaser have agreed to advise the Company promptly of any understandings,
undertakings or agreements which such parties propose to make or enter into
with the FTC, the Antitrust Division, the Canadian Competition Bureau or any
other governmental authority in connection with the transactions contemplated
by the Pre-Acquisition Agreement.
Debt Obligations. In the Pre-Acquisition Agreement, the Company has agreed
to use reasonable efforts to cooperate and assist Parent in obtaining consents
to modifications and in purchasing certain of the Company's outstanding debt
obligations, including the conduct of (or provision of assistance to Parent in
conducting) a consent solicitation and tender offer for the outstanding debt
securities of the Company or its subsidiaries on terms satisfactory to Parent;
provided that (i) the Company shall not be required to purchase any debt
obligations or pay any fees in connection with such efforts prior to
consummation of the Second Step Transaction, unless funds therefor are
provided by Parent on terms satisfactory to the Company and (ii) Parent shall
pay or reimburse the Company for all reasonable expenses in connection
therewith. The Company also represented that, as of the date of the Pre-
Acquisition Agreement, the Company was able to incur at least $1.00 of
additional Indebtedness under certain of its existing debt instruments. The
Company is advised that Parent or its affiliates intend to make a tender
offer/consent solicitation for certain of the Company's outstanding debt
obligations that will be contingent upon consummation of the transactions
contemplated by the Pre-Acquisition Agreement.
Compensation; Benefit Plans. Pursuant to the Pre-Acquisition Agreement,
except as otherwise agreed with a relevant employee, Parent and the Purchaser
agree, and after the Effective Time will cause the Company and any successor
thereto to agree, to maintain until December 31, 1999 salaries and all benefit
plans and compensation programs currently available to employees of the
Company or any of its subsidiaries, including without limitation members of
management of the Company or any of its subsidiaries, or to make available
until December 31, 1999 alternative benefit plans and compensation programs
which are comparable in the aggregate to those currently available to such
employees. For these purposes, "benefit plans" means all arrangements,
agreements, programs or policies, whether funded or unfunded, relating to
employees to which the Company or any of its subsidiaries is a party or by
which it is bound and under which the Company or any of its subsidiaries have
any liability or contingent liability and relating to: (i) retirement savings
or pensions, including any defined benefit pension plan, defined contribution
plan, group registered retirement savings plan, thrift and saving plan or
supplemental pension or retirement plan; (ii) employee welfare benefits, as
defined for purposes of Section 3(1) of the Employee Retirement Income
Security Act of 1974 (United States), as amended, including hospitalization,
health, disability, life or severance pay benefits; and (iii) profit sharing,
bonus, stock incentive, stock purchase and other incentive plans or programs.
Indemnification. (a) The Pre-Acquisition Agreement provides that if Parent
acquires the Shares under the Offer, Parent shall cause the Company to fulfill
its obligations pursuant to indemnities provided or available to past and
present officers and directors of the Company pursuant to the provisions of
the Company's governing documents, the Canada Business Corporations Act, as
amended (the "Canada BCA"), and the written indemnity agreements entered into
between the Company and its officers and directors.
(b) Pursuant to the Pre-Acquisition Agreement, the Purchaser has agreed to
use reasonable efforts to secure directors' and officers' liability insurance
coverage for the Company's current and former directors and officers on a six
year "trailing" or "runoff" basis from and after the Effective Time. If a
"trailing" policy is not available, then the Purchaser has agreed that, for
the entire period from the Effective Time until six years after the Effective
Time, the Purchaser will use reasonable efforts to cause the Company or any
successor thereto to
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maintain the Company's current directors' and officers' insurance policy or an
equivalent policy, subject in either case to terms and conditions no less
advantageous to the directors and officers of the Company than those contained
in the policy in effect on the date of the Pre-Acquisition Agreement, for all
present and former directors and officers of the Company, covering claims made
prior to or within six years after the Effective Time. The Purchaser, however,
shall not be required to pay an annual premium in excess of 200% of the
aggregate annual amounts currently paid by the Company to maintain the
existing policies (the "Insurance Amount") and, if equivalent coverage cannot
be obtained, or can be obtained only by paying an annual premium in excess of
such amount, Purchaser shall use its reasonable best efforts to obtain as much
comparable insurance as is available for the Insurance Amount.
Termination. The Pre-Acquisition Agreement may be terminated upon written
notice at any time prior to the completion of the transactions contemplated
thereby:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company (provided that the terminating party
is not then in breach, in any material respect, of any covenant or other
agreement contained in the Pre-Acquisition Agreement and no representation
or warranty of such terminating party contained in the Pre-Acquisition
Agreement that is qualified as to materiality shall be untrue or incorrect,
and no representation or warranty of such terminating party contained in
the Pre-Acquisition Agreement that is not so qualified shall be untrue or
incorrect in any material respect, at any time before the Effective Time,
in each case, as if made at and as of such time (or, to the extent such
representation or warranty speaks as of a specific date, no such
representation or warranty was so untrue or incorrect as of such date)), if
there shall have been a breach, in any material respect, of any covenant or
other agreement contained in the Pre-Acquisition Agreement on the part of
the other party or if any representation or warranty of such other party
contained in the Pre-Acquisition Agreement that is qualified as to
materiality shall not be true and correct, or any representation or
warranty of such other party contained in the Pre-Acquisition Agreement
that is not so qualified shall not be true and correct in all material
respects, at any time before the Effective Time, in each case as if made at
and as of such time (or, to the extent such representation or warranty
speaks as of a specific date, such representation or warranty was not so
true and correct as of such date), which breach or misrepresentation is not
cured within 10 days following written notice to such other party, or such
breach, by its nature or timing cannot be cured prior to the expiration of
the Offer;
(c) by the Company, following receipt of, and in order to accept or
recommend, a Superior Take-over Proposal if, after consulting with outside
counsel, the Board has determined that such action is required in order to
discharge properly the directors' fiduciary duties under applicable law;
(d) by Parent, if (i) the Board or any committee thereof modifies or
amends in any manner adverse to Parent or Purchaser, or withdraws, its
authorization, approval or recommendation of the Offer or the Pre-
Acquisition Agreement or shall have resolved to do any of the foregoing or
(ii) the Company or any of its subsidiaries (or the Board or any committee
thereof) shall have approved, recommended, authorized, proposed or filed a
document with any Securities Authority not opposing, or publicly announced
its intention to enter into any Take-over Proposal (other than with Parent,
Purchaser or any of their affiliates), or shall have resolved to do any of
the foregoing;
(e) by either Parent or the Company, if the Offer terminates or expires
at the Expiry Time, without Purchaser taking up and paying for any Shares
on account of the failure of any of the Offer Conditions which has not been
waived by Purchaser, unless the absence of such occurrence shall be due to
the failure of the party seeking to terminate the Pre-Acquisition Agreement
to perform its requisite obligations thereunder; or
(f) by either Parent or the Company, if the date that Purchaser first
takes up and acquires Shares pursuant to the Offer (the "Take-up Date") has
not occurred on or prior to December 15, 1999.
In the event of a termination of the Pre-Acquisition Agreement by either the
Company or Parent as provided under "--Termination", the Pre-Acquisition
Agreement shall forthwith have no further force or effect and there shall be
no obligation on the part of Parent, the Purchaser or the Company thereunder,
except (A) Parent shall be
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obligated to reimburse the Company for certain expenses that it may have
incurred in connection with repurchasing debt obligations of the Company, (B)
if the Pre-Acquisition Agreement is terminated pursuant to subsections (c) or
(d) described under "--Termination" above, the Company is required to pay
Parent $15 (U.S.) million either concurrently (in the case of a termination
under subsection (c)) or within two business days after the termination (in
the case of a termination under (d)) and (C) if the Pre-Acquisition Agreement
is terminated pursuant to subsections (e) or (f) described under "--
Termination" above, principally as a result of the failure to obtain antitrust
approvals contemplated under clause (b) of the Offer Conditions (See "--
Certain Conditions of the Offer" below), Parent shall pay the Company $10
(U.S.) million unless the Company has breached certain covenants in the Pre-
Acquisition Agreement.
In addition, the Pre-Acquisition Agreement provides that if a Take-over
Proposal is announced publicly while the Offer is open for acceptance and the
minimum acceptance condition contemplated under clause (a) of the Offer
Conditions is not satisfied at the expiration of the Offer (other than
principally as a result of a failure to obtain certain antitrust approvals),
then, within two business days after such expiration, the Company shall pay
Parent a fee in the amount of $15 (U.S.) million. In the event a Take-over
Proposal is announced publicly and made after the expiration of the Offer but
prior to March 31, 2000, then, if Purchaser did not take up and pay for any
Shares under the Offer, but the Company was not entitled to any payment from
Parent because of a failure to obtain antitrust approvals, the Company, within
two business days after such Take-over Proposal is made, shall pay to Parent a
fee in the amount of $15 (U.S.) million.
Extension; Waiver. The Pre-Acquisition Agreement provides that Parent and
the Purchaser, on the one hand, and the Company, on the other hand, may (i)
extend the time for the performance of any of the obligations or other acts of
the other, (ii) waive compliance with any of the other's agreements or the
fulfillment of any conditions to its own obligations contained in the Pre-
Acquisition Agreement, or (iii) waive inaccuracies in any of the other's
representations and warranties contained in the Pre-Acquisition Agreement or
in any document delivered pursuant thereto; provided, however, that any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
Other Covenants. Nothing in the Pre-Acquisition Agreement (other than as
expressly provided for) shall obligate Parent or the Purchaser (i) to keep the
Offer open for acceptance beyond the expiration date set forth in the Offer
(as it may be extended from time to time) or (ii) to take any action that, in
the reasonable judgment of Parent, would reasonably be expected to materially
impair the overall benefits to be realized by Parent from consummation of the
Offer and the other transactions contemplated by the Pre-Acquisition
Agreement.
Subject to the Confidentiality Agreement and upon reasonable notice, the
Company is obligated to afford Parent's officers, employees, counsel,
accountants and other authorized representatives and advisers reasonable
access, during normal business hours and until the expiration of the Pre-
Acquisition Agreement, to all of its properties, books, contracts and records
as well as to its management personnel, and, during such period, the Company
is obligated to furnish promptly to Parent all information concerning its
business, properties and personnel as Parent may reasonably request.
Fees and Expenses. Except in connection with fees payable to obtain
modification of debt covenants or fees payable as a result of the reason for
the termination of the Pre-Acquisition Agreement, all fees, costs and expenses
incurred in connection with the Pre-Acquisition Agreement and the transactions
contemplated thereby shall be paid by the party incurring such cost or
expense, whether or not the Offer is consummated.
Amendment. The Pre-Acquisition Agreement provides that it may be amended by
mutual agreement between the parties thereto, by an instrument in writing
signed by the appropriate officers on behalf of each of the parties thereto.
Certain Conditions of the Offer. Notwithstanding any other term of the
Offer, the obligation of the Purchaser to, and of Parent to cause the
Purchaser to, commence the Offer, conduct and consummate the Offer and accept
for payment or, subject to any applicable rules and regulations of the
Commission, including
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Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation
to pay for or return tendered Shares after the termination or withdrawal of
the Offer), to pay for, any Shares tendered (and not properly withdrawn)
pursuant to the Offer shall be subject only to the following Offer Conditions:
(a) at the expiration of the Offer, the number of Shares that shall have
been validly deposited under the Offer (and not properly withdrawn),
together with any Shares held by or on behalf of Parent, or any of its
subsidiaries, shall constitute at least 71.0% of the outstanding Shares
(calculated on a diluted basis) (the "Minimum Condition");
(b) all material requisite governmental and regulatory approvals and
consents (including, without limitation, those of any stock exchanges or
Securities Authorities) required in Parent's reasonable judgment to make
lawful the purchase by, or the sale to, Purchaser of, the Shares (whether
under the Offer, a compulsory acquisition or Second Step Transaction) shall
have been obtained and all applicable statutory or regulatory waiting
periods during the pendency of which the purchase by, or the sale to,
Purchaser of the Shares would be illegal shall have expired or been
terminated without the imposition of any conditions that, individually or
in the aggregate, have or are reasonably likely to have the consequences
referred to in clauses (i) through (iii) of paragraph (c) below; without
limiting the foregoing: (i) the applicable waiting periods under HSR and
the Competition Act with respect to the Offer shall have expired or been
terminated; (ii) the Offer shall have been approved or deemed to be
approved or exempted pursuant to the Investment Canada Act; and (iii) all
other consents and approvals without which in Parent's reasonable judgment
the purchase by, or the sale to, Purchaser of the Shares (whether under the
Offer, a compulsory acquisition or Second Step Transaction) would be
illegal have been obtained;
(c) no statute, rule, regulation, executive or other order shall have
been enacted, issued, promulgated or enforced by any governmental authority
and no preliminary or permanent injunction, temporary restraining order or
other legal restraint or prohibition shall have been threatened or issued
by (and no action, proceeding or counterclaim shall be pending or
threatened by or before) a court or other governmental authority (i)
preventing or rendering, or seeking to prevent or render, illegal the
making of the Offer, the acceptance for payment of, the payment for, or
ownership, directly or indirectly, of some or all of the Shares by
Purchaser or the completion of a compulsory acquisition or Second Step
Transaction, (ii) imposing or confirming, or seeking to impose or confirm,
limitations on the ability of Parent or Purchaser, directly or indirectly,
effectively to acquire or hold or to exercise full rights of ownership of
the Shares or otherwise control the Company, in a manner that, in the
reasonable judgment of Parent, would reasonably be expected, in the
aggregate, to materially impair the overall benefits to be realized by
Parent from consummation of the Offer and the other transactions
contemplated by the Pre-Acquisition Agreement, or (iii) requiring, or
seeking to require, divestiture by Purchaser, directly or indirectly, of
any Shares or requiring Purchaser, Parent, the Company or any of their
respective subsidiaries or affiliates to dispose of or hold separate all or
any portion of their respective businesses, assets or properties or
imposing any limitations on the ability of any of such entities to conduct
their respective businesses or own such assets, properties or the Shares or
on the ability of Parent or Purchaser to conduct the business of the
Company and its subsidiaries and own the assets and properties of the
Company and its subsidiaries, in each case under this clause (iii) in a
manner that, in the reasonable judgment of Parent, would reasonably be
expected, in the aggregate, to materially impair the overall benefits to be
realized by Parent from consummation of the Offer and the other
transactions contemplated by the Pre-Acquisition Agreement;
(d) (i) the Company shall not have breached, or failed to comply with, in
any material respect, any of its covenants or other obligations under the
Pre-Acquisition Agreement, and (ii) each of the representations and
warranties of the Company contained in the Pre-Acquisition Agreement that
is qualified as to materiality shall be true and correct and any such
representation or warranty that is not so qualified shall be true and
correct, in all material respects, as of the date of the Pre-Acquisition
Agreement and as of the expiration of the Offer as if made on and as of the
expiration of the Offer (except to the extent such representations and
warranties speak as of a specific date, which shall be so true and correct
as of such date); provided that in either case the Company has been given
notice of and ten (10) business days to cure any such
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<PAGE>
misrepresentation, breach or non-performance or such misrepresentation,
breach or non-performance by its timing or nature cannot be cured before
such tenth business day;
(e) at any time after the date of the Pre-Acquisition Agreement, there
shall not have occurred any event, occurrence, development or state of
circumstances that has had any effect on the business, operations, results
of operations or financial condition of the Company or any of its
subsidiaries that, individually or in the aggregate, is materially adverse
to the business of the Company and its subsidiaries considered as a whole,
other than any such effect (i) which arises out of a matter that has been
publicly disclosed prior to the date of the Pre-Acquisition Agreement or
otherwise disclosed to Parent in the disclosure schedule to the Pre-
Acquisition Agreement, (ii) resulting from conditions affecting the
residential and light commercial air conditioning and heating product
industries in Canada and the United States, (iii) resulting from general
economic, financial, currency exchange, securities or commodity market
conditions in Canada, the United States or elsewhere or (iv) resulting
solely from the public announcement of the transactions contemplated by the
Pre-Acquisition Agreement;
(f) there shall not have occurred, developed or come into effect or
existence any event, action, state, condition or major financial occurrence
of national or international consequence or any law, regulation, action,
governmental regulation, inquiry or other occurrence of any nature
whatsoever which, in the reasonable judgment of Parent, materially
adversely affects or involves, the general economic, financial, currency
exchange, securities or commodity market operations in Canada or the United
States;
(g) neither the Company nor any of its subsidiaries (or the Board or any
committee thereof) shall have approved, recommended, authorized, proposed,
filed a document with any Securities Authorities not opposing, or publicly
announced its intention to enter into, any Take-over Proposal (other than
with Purchaser or any of its affiliates) and shall not have resolved to do
any of the foregoing;
(h) the Pre-Acquisition Agreement shall not have been terminated pursuant
to its terms; and
(i) the Board or any committee thereof shall not have modified or amended
in any manner adverse to Parent or Purchaser, and shall not have withdrawn,
its authorization, approval or recommendation of the Offer or the Pre-
Acquisition Agreement and shall not have resolved to do any of the
foregoing.
The Confidentiality Agreement
The following is a summary of certain material provisions of the
Confidentiality Agreement. This summary does not purport to be complete and is
qualified in its entirety by reference to the complete text of the
Confidentiality Agreement, a copy of which is filed herewith as Exhibit 3 to
this Statement and incorporated herein by reference.
Pursuant to the Confidentiality Agreement, Parent and its representatives
agreed to keep confidential certain information received from the Company. The
Confidentiality Agreement also contains a six-month standstill provision and a
provision pursuant to which Parent agreed not to solicit for employment any
person employed by the Company. The provisions of the Confidentiality
Agreement shall remain binding and in full force and effect for a period of
two years and the parties shall comply with, and shall cause their respective
agents and representatives to comply with, all of their respective obligations
under the Confidentiality Agreement.
The Letter Agreements
The following sets forth a summary of certain provisions of Letter
Agreements that were entered into between Purchaser and Ravine Partners, Ltd.
("Ravine") and between Purchaser and the Ontario Teachers Pension Plan Board
("Teachers"), respectively (each, a "Letter Agreement" and, collectively, the
"Letter Agreements"). Richard W. Snyder, the Chairman of the Board, is the
general partner of Ravine and Roy T. Graydon, a director of the Company, is
the portfolio manager of Teachers. Copies of the Letter Agreements are filed
herewith as Exhibits 7 and 8 to this Statement and are incorporated herein by
this reference.
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The Letter Agreements were entered into concurrently with the execution of
the Pre-Acquisition Agreement. Ravine is the owner of 7,889,870 Shares
(representing approximately 18.42% of the outstanding Shares on a fully
diluted basis) and Teachers is the owner of 7,919,638 Shares (representing
approximately 18.49% of the outstanding Shares on a fully diluted basis).
Pursuant to the Letter Agreements, Ravine and Teachers agreed to validly
tender and not withdraw their Shares, unless (in the case of Teachers only) a
Superior Take-over Proposal is made. In addition, Ravine has granted Purchaser
an option to purchase its Shares at a price of $11.75 (U.S.) per Share (or any
greater amount per Share paid in the Offer). Such option is exercisable in
certain circumstances following termination of the Pre-Acquisition Agreement.
The option to acquire Ravine's Shares is exercisable if (a) the Pre-
Acquisition Agreement is terminated (i) by the Company because the Company has
received a Superior Take-over Proposal and the Board has determined that its
fiduciary duties require it to terminate the Pre-Acquisition Agreement, or
(ii) by Parent because (A) the Board or any committee thereof has modified in
any manner adverse to Parent or Purchaser or withdrawn its approval or
recommendation of the Offer or (B) the Company has publicly announced its
intention to enter into a business combination with any person other than
Parent or Purchaser or taken other public actions not opposing any Take-over
Proposal (other than with Parent or Purchaser); (b) a Take-over Proposal with
respect to the Company is announced by a person other than Parent or Purchaser
while the Offer is open and the Minimum Condition contemplated under
subsection (a) described under "--Certain Conditions of the Offer" is not
satisfied (other than principally as a result of a failure to obtain antitrust
approvals); or (c) a Take-over Proposal with respect to the Company is
announced by a person other than Parent or Purchaser after the Offer has
closed but prior to March 31, 2000 and Purchaser did not consummate the Offer
(other than principally as a result of a failure to obtain antitrust
approvals).
If Purchaser acquires Ravine's Shares by exercising its option and then
sells such Shares to a buyer in connection with any Take-over Proposal within
12 months of the Closing, Ravine is entitled to receive 75% of the excess of
the aggregate proceeds received by the Purchaser in such sale over the
aggregate price the Purchaser paid in exercising the option for those Shares.
The Letter Agreements also contain covenants by Ravine and Teachers not to
take any action to solicit, initiate or encourage inquiries, proposals or
offers from, or provide information to any other person relating to the direct
or indirect acquisition or disposition of any securities of the Company or its
subsidiaries. Each of Ravine and Teachers further covenants not to cooperate
or participate in any amalgamation, merger or other business combination of
the Company or its subsidiaries and not to dispose of any of their Shares,
except in accordance with the applicable Letter Agreement.
The Letter Agreements further contain a covenant by Ravine and Teachers to
use all reasonable efforts to cause their associates or nominees who serve
directors of the Company to resign as the Purchaser requests after the
Purchaser acquires the Shares under the Offer. Currently, at least two Board
members, one of whom is the chair, are designees of Ravine and Teachers.
In the case of the Letter Agreement with Ravine, if the option is not
exercised, then from and after the date when the option ceases to be
exercisable, the Letter Agreement terminates. Teachers may terminate its
Letter Agreement at the earlier of (i) a third party's making a bona fide
offer that constitutes a Superior Take-over Proposal; (ii) termination of the
Pre-Acquisition Agreement; or (iii) December 15, 1999.
Arrangements with Directors or Executive Officers of the Company
Information regarding contracts, agreements, arrangements or other
understandings and any potential conflict of interest between the Company and
its executive officers and directors that may be material to the Offer was
contained in the Company's Notice of Annual and Special Meeting and Management
Proxy Circular (the "1999 Proxy Circular") sent to shareholders of the Company
in connection with its meeting held May 19, 1999. A copy of the relevant
portions of the 1999 Proxy Circular is included in the Company's Information
Statement attached as Annex A hereto and filed herewith as Exhibit 4 to this
Statement.
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As described in the 1999 Proxy Circular, the five executive officers for
whom disclosure was required in the 1999 Proxy Circular (W. Michael Clevy,
David P. Cain, Stephen L. Clanton, Augusto H. Millan and James R. Wiese) are
parties to change in control and termination agreements. In addition, seven
other executive officers are parties to such agreements. Four (Herman V.
Kling, Francis C. Harrell, Robert C. Henningsen and H. David Tayler) are
parties to change in control agreements having 24 month Severance Periods (as
described in the 1999 Proxy Circular) and three (Douglas K. Gibbs, David B.
Schumacher and Karla G. Smith) are parties to change in control agreements
having 18 month Severance Periods. In addition, Mr. Kling is a party to a
termination agreement substantially identical to that described in the 1999
Proxy Circular with respect to Mr. Clanton. Under certain of the Company's
annual and long term incentive plans, a change in control of the Company such
as will result from the consummation of the Offer also will result in the
acceleration of benefits thereunder to the Company's executive officers.
The Pre-Acquisition Agreement provides that the Purchaser shall honor and
comply with the terms of any existing executive termination agreements (see
"--Employment Agreements and Termination").
Parent has offered employment to each of Messrs. Kling, Schumacher and
Wiese, effective upon consummation of the Offer upon terms to be negotiated.
Each has been offered sign-on bonuses of $100,000 and the opportunity to
convert certain severance benefits and stock awards. At this time, no
agreement has been reached with any of these individuals.
The Company, in consultation with Parent, also has adopted an incremental
bonus plan for certain senior officers in respect of services to be provided
by such officers in connection with the transition of the Company's ownership
to Purchaser. The bonus plan will provide for bonuses to be paid by the
Company within 60 to 90 days after the consummation of the Offer and will
involve aggregate payments of approximately $1 million (U.S.). With the
exception of Mr. Clevy, who is proposed to receive $500,000, the participants
and the amounts to be paid to the participating officers have not yet been
determined; however, the Company and Parent intend to consult with each other
in respect of the details of the plan.
Item 4. The Solicitation or Recommendation.
(a) Recommendation. The Board, at a special meeting duly called and held on
June 23, 1999, by a vote of all directors present, unanimously (i) determined
that the Pre-Acquisition Agreement and the transactions contemplated thereby,
including the Offer, are fair to and in the best interests of the shareholders
of the Company, (ii) approved the Offer and the Pre-Acquisition Agreement and
resolved to recommend acceptance of the Offer by the Company's shareholders,
provided that the Offer is not amended except in accordance with the terms of
the Pre-Acquisition Agreement, and (iii) determined to elect, to the extent
permitted by law, not to be subject to any "moratorium", "control share
acquisition", "business combination", "fair price" or other form of anti-
takeover laws and regulations of any jurisdiction that may purport to be
applicable to the Pre-Acquisition Agreement. A copy of the Company's letter to
shareholders, dated as of June 30, 1999, is filed herewith as Exhibit 5 to
this Statement and incorporated herein by reference.
(b) Background; Reasons for the Board's Recommendation.
Background. As part of its responsibilities, the Board considers and reviews
from time to time strategic alternatives available to the Company. In light of
the interest of Ravine and Teachers in possibly selling some or all of their
respective holdings of Shares and the interest of the President and Chief
Executive Officer in possibly being part of a group which might make an offer
for the Company, the Board established on January 20, 1999 a committee of
directors (the "Special Committee") to consider strategic alternatives
available to the Company.
The members of the Special Committee are Messrs. Stanley M. Beck, Q.C.,
Marvin G. Marshall, David A. Rattee and William A. Wilson. Each of these
directors is an independent member of the Board, is independent of Ravine and
Teachers and is independent of Parent and Purchaser. The Special Committee has
met frequently on a formal and an informal basis (primarily by conference
telephone) during the past six months amongst themselves and together with,
among others, management, CSFB, Ravine, Teachers and legal counsel to each of
the Company and CSFB.
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On January 26 and 28, 1999, members of the Special Committee met separately
with representatives of three nationally recognized investment banking firms
and received from each of them a presentation on their respective credentials
to assist the Special Committee and the Board and to act as financial advisor
in connection with the Company's review of strategic alternatives. Following
these presentations, the Special Committee unanimously recommended, and the
Board unanimously authorized and approved on February 3, 1999, the appointment
of CSFB as financial advisor to the Company. CSFB was retained and an
engagement letter between the Company and CSFB was negotiated and executed.
Following its due diligence review of the Company, CSFB discussed initially
with the Special Committee, and subsequently with the Board on March 9, 1999,
its views on the Company, potential industry and financial buyers and
recommendations with respect to the strategic review process. After discussion
with CSFB, the Board authorized the Special Committee and CSFB to pursue a
confidential selective sale process in order to determine whether there was
any third party interest in an acquisition of the Company.
CSFB initially approached more than 40 potential industry and financial
buyers, including Parent, in order to solicit preliminary indications of
interest in an acquisition of the Company. The Company received preliminary
indications of interest from more than 20 parties, including Parent.
Confidentiality and standstill agreements were forwarded to these parties and
such agreements were negotiated and entered into by the Company with these
parties, including Parent. A confidential information memorandum relating to
the Company and its businesses, which had been prepared by CSFB in conjunction
with senior management of the Company, was delivered to the parties, including
Parent, who had signed a confidentiality agreement. Further indications of
interest in a potential acquisition of the Company were received from
interested parties, including Parent, on April 23, 1999. Following discussions
with CSFB about the respective levels of interest from these parties, the
Special Committee directed CSFB to continue to deal with a select group of
these parties, including Parent. Each of these parties, including Parent, was
invited to conduct due diligence with respect to the Company and to attend a
confidential management presentation focussing on the Company and its
businesses.
During the week of May 24, 1999, at the request of the Special Committee,
CSFB forwarded to each of the final round bidders, including Parent, a formal
request that any offer to acquire all of the Shares be made in writing by June
15, 1999. Accompanying the bid request was a form of pre-acquisition agreement
which each party was asked to review and indicate any necessary changes
thereon for purposes of that party's offer. Each of the final round bidders,
including Parent, responded to CSFB's request with an acquisition proposal,
together with a marked-up copy of the pre-acquisition agreement or a
memorandum setting out their principal concerns with the agreement. At a
meeting held on June 16, 1999, the respective terms and conditions of the
final round offers were reviewed with the Special Committee by CSFB and legal
counsel for CSFB and the Company. The Special Committee was also advised that
a key term of the Parent's offer was that two of the Company's major
shareholders, Ravine and Teachers enter into agreements with Purchaser under
which they would agree to tender, and grant an option to transfer their
Shares, to Purchaser (the "Letter Agreements"). As well, the Special Committee
received a report on the course of discussions which had taken place earlier
on June 16, 1999 relating to the Parent's offer and its terms and conditions
at a meeting involving representatives of Parent, its legal counsel, CSFB, a
member of the Special Committee and legal counsel for CSFB and the Company.
Following questions by, and discussions among, members of the Special
Committee, CSFB was instructed to contact each of the final round bidders to
discuss certain aspects of their proposals.
Following discussions between Parent and CSFB on June 17, 1999 and June 18,
1999, concerning Parent's proposal, the Special Committee instructed CSFB and
legal counsel for the Company to meet with representatives of Parent and its
legal advisors to negotiate the final terms of the pre-acquisition agreement
(which the parties agreed would provide for the making of an offer for all the
Shares by the Purchaser at a price of $11.75 per Share). Such negotiations
commenced on June 21, 1999 and were intensively conducted through June 21, 22
and 23, 1999. During this period, the status and subject matter of
negotiations were discussed with the Chairman of the Special Committee, and
Parent independently negotiated the terms of the Letter Agreements with Ravine
and Teachers.
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The Special Committee met at noon on June 23, 1999 and received a further
report from CSFB on the final round offers to acquire the Company. CSFB
reviewed various aspects of each of the offers with the Special Committee,
including CSFB's assessment of the overall value of each offer, the conditions
and terms of the respective offers (including financing), break-fee
arrangements and other factors. CSFB also confirmed its ability to provide the
Board with a fairness opinion with respect to the Parent's offer. The Special
Committee was also updated by legal counsel on the status of negotiations on
the pre-acquisition agreement. Following these presentations and discussions
and after deliberations, the Special Committee concluded unanimously that the
Parent's offer of $11.75 cash per Share was an offer which the Board could
approve and recommend for acceptance by the holders of Shares.
The Board met at 2:00 p.m. on June 23, 1999. Eleven of the twelve directors
attended and participated in person or telephonically at this meeting. At the
outset of the meeting, the Board received a report from the Chairman of the
Special Committee. The report provided the Board with an update on the
confidential selective sale process concluding with the Special Committee's
view on the final round offers made for the Company and its recommendation
that the Parent's offer was an offer which the Board could approve and
recommend for acceptance by the holders of Shares. CSFB provided the Board
with its review of the final round offers, their respective terms and
conditions and their assessment of the relative values contemplated by the
offers. Legal counsel briefed the Board on the fiduciary duties of directors
and other matters of Canadian corporate law and on certain regulatory matters.
As well, counsel reviewed with the Board the terms and conditions of the
proposed pre-acquisition agreement with Parent, including the (i) terms of the
offer; (ii) offer conditions; (iii) no solicitation limitation; (iv) fiduciary
duty exception for a Superior Take-Over Proposal; (v) events of termination;
(vi) mutual termination fees; (vii) covenants, representations and warranties
of the Company, the Purchaser and Parent; (viii) conduct of the Company's
business during the offer period; and (ix) other key terms and provisions.
CSFB then completed its review of the fairness of the Parent's offer from a
financial point of view. CSFB delivered an oral opinion to the Board, which
was subsequently confirmed in writing, that, as of June 23, 1999 and based
upon and subject to the matters reviewed with the Board, the consideration to
be received by the shareholders of the Company in the Offer and in the Second
Step Transaction was fair to the shareholders from a financial point of view.
A copy of the CSFB opinion is attached hereto as Annex B to this Statement and
incorporated herein by this reference.
After these presentations on the Parent's offer and after deliberation with
respect thereto, the Board members present unanimously (i) determined that the
Parent's offer is fair to holders of Shares and is in the best interests of
the Company; (ii) approved the Parent's offer; (iii) authorized and approved
the execution and delivery of the Pre-Acquisition Agreement; (iv) resolved to
recommend acceptance of the Parent's offer by holders of Shares; and (v)
determined to elect, to the extent permitted by law, not to be subject to
certain forms of anti-takeover laws and regulations.
After the close of trading on June 23, 1999, the Company, Parent and
Purchaser executed the Pre-Acquisition Agreement. Also on June 23, 1999,
Ravine and Teachers entered into their respective Letter Agreements with the
Purchaser.
Early on June 24, 1999, the Company and Parent issued a press release
announcing the execution of the Acquisition Transaction and the Letter
Agreements. On June 30, 1999, the Offer was commenced.
Reasons for the Board's Recommendation
After considering the Offer and other matters it considered relevant, the
Board, by a unanimous vote of all directors present, resolved to recommend
that holders of the Shares accept the Offer.
In arriving at that conclusion, the Board relied upon and considered, among
other things, the following:
. the familiarity of the Board with the Company's business, financial
condition, results of operations, properties and prospects as an
independent entity, and the nature of the industry in which it operates,
based in part upon presentations by the Company's management;
16
<PAGE>
. the Offer Price represents a premium of $3.20 or approximately 37.4%
over the average closing price of the Shares reported on the American
Stock Exchange for the three calendar month period ended June 23, 1999,
the last trading day prior to the public announcement of the Offer on
June 24, 1999. In focusing on the premium over the average Share price
during the three months prior to the date of the public announcement of
the Offer, the Board acknowledged the significant increase in the
Company's stock price during the month prior to the public announcement
of the Offer;
. the fact that Ravine and Teachers have agreed with the Purchaser to
tender an aggregate of 36.9% of the outstanding Shares (on a fully
diluted basis);
. that the Offer is for all of the Shares;
. the opinion dated June 23, 1999 of CSFB (a copy of which is attached
hereto as Annex B to this Statement and incorporated herein by this
reference) that, as of such date and based upon and subject to the
matters set forth therein, the consideration to be received by the
shareholders of the Company under the Offer and in any Second Step
Transaction (as defined therein) was fair to such shareholders from a
financial point of view;
. information regarding the financial, operating and stock price history
of the Company in comparison to selected comparable companies, including
certain of the Company's competitors;
. consideration of other possible acquirors of the Company;
. that the Pre-Acquisition Agreement is structured to permit the Company,
upon determination of the Board that such action would further the best
interests of the shareholders of the Company, to respond to any written
unsolicited Superior Take-over Proposal (as hereinafter defined) and to
furnish information to and to negotiate with the party making such
Superior Take-over Proposal, provided that the acceptance or
recommendation of any such Superior Take-over Proposal may entitle the
Purchaser to a termination fee;
. the terms and conditions of the Pre-Acquisition Agreement, including
that the Company or the Purchaser could, under certain circumstances, be
entitled to a termination fee; and
. that the Offer is not subject to a financing condition.
The foregoing discussion of the information and factors considered and given
weight by the Board is not intended to be exhaustive. In view of the wide
variety of factors considered in connection with its evaluation of the Offer,
the Board did not find it practicable to, and did not, quantify or otherwise
attempt to assign relative weights to the specific factors considered in
reaching its determinations and recommendation. In addition, individual
members of the Board may have given different weight to different factors.
Shareholders should nevertheless consider the Offer carefully and come to
their own decision as to acceptance or rejection of the Offer. Shareholders
who are in doubt as to how to respond to the Offer should consult their
investment dealer, stockbroker, chartered accountant, lawyer or other
professional advisor.
Based on the foregoing factors, the Board determined to recommend the
acceptance of the Offer by the Company's shareholders as described above.
Item 5. Persons Retained, Employed or to be Compensated.
The Company has retained CSFB, an internationally recognized investment
bank, to act as its exclusive financial advisor in connection with the
transactions contemplated by the Pre-Acquisition Agreement. Pursuant to the
terms of their engagement, the Company has agreed to pay CSFB a fee in a total
amount of approximately $5.5 (U.S.) million, approximately $4.3 (U.S.) million
of which will be payable upon the completion of the transaction. The Company
will reimburse CSFB for its reasonable out-of-pocket expenses and has agreed
to indemnify CSFB against certain liabilities, including liabilities under the
United States federal securities laws, that may arise in connection with its
engagement.
17
<PAGE>
In the ordinary course of business, CSFB and its affiliates have performed,
and may from time to time perform, investment banking services for the Company
and Parent, and have received customary fees for such services. In the
ordinary course of business, CSFB and its affiliates may actively trade the
debt and equity securities of both the Company and Parent for their own
accounts and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.
Except as disclosed herein, neither the Company nor any person acting on its
behalf has employed, retained or compensated any other person to make
solicitations or recommendations to shareholders on its behalf concerning the
Offer or any other transaction contemplated by the Pre-Acquisition Agreement.
Item 6. Recent Transactions and Intent with Respect to Securities.
(a) Except as set forth below, no transactions in the Shares have been
effected during the past 60 days by the Company or, to the Company's
knowledge, by any executive officer, director, affiliate or subsidiary of the
Company:
On June 25, 1999, Francis C. Harrell, an executive
officer of the Company, sold 8,000 Shares.
(b) To the best knowledge of the Company, each of its executive officers,
directors, affiliates and subsidiaries currently intends to tender all Shares
which are held of record or beneficially owned by them to the Purchaser
pursuant to the Offer.
Item 7. Certain Negotiations and Transactions by the Subject Company.
(a) Prior to entering into the Pre-Acquisition Agreement, the Company had
contacts and negotiations with other entities that had expressed interest in
the Company. Upon execution of the Pre-Acquisition Agreement, the Company
ceased contacts with such other entities. Except as set forth in this
Statement, no negotiation is underway or is being undertaken by the Company in
response to the Offer that relates to or would result in (1) an extraordinary
transaction, such as a merger or reorganization, involving the Company or any
of its subsidiaries; (2) a purchase, sale or transfer of a material amount of
assets by the Company or any of its subsidiaries; (3) a tender offer for or
other acquisition of securities by or of the Company; or (4) any material
change in the present capitalization or dividend policy of the Company.
(b) Except as set forth in this Statement, there is no transaction, board
resolution, agreement in principle or signed contract in response to the Offer
that relates to or would result in one or more of the events referred to in
Item 7(a) above.
Item 8. Additional Information to be Furnished.
(a) The Company's Information Statement attached as Annex A hereto and filed
as Exhibit 4 hereto is being furnished in connection with the possible
designation by the Purchaser, pursuant to the Pre-Acquisition Agreement, of
certain persons to be appointed to the Company's Board other than at a meeting
of the Company's shareholders.
(b) On June 25, 1999, Stanley Ginkowski and Jeff Grau filed a class action
lawsuit in the Chancery Court of Marshall County, Tennessee, naming as
defendants the Company and all of the directors of the Company. The plaintiffs
seek to enjoin any actions by the Company in furtherance of the Offer or,
alternatively, to recover damages in the event the Offer and any subsequent
merger is consummated. The plaintiffs claim that the consideration to be
received by shareholders in the proposed transaction with Parent and Purchaser
is unfair and inadequate, that the Company's directors breached certain
alleged fiduciary duties to the Company's shareholders and that the Company's
directors will be unjustly enriched by the transaction. The Company believes
the claims against the Company and its directors are without merit and intends
to vigorously defend all claims made against them. The Company and Parent do
not anticipate that the suit will have any effect on their plans to proceed
with the proposed transaction.
18
<PAGE>
(c) Under the HSR, the purchase of Shares pursuant to the Offer cannot be
made until the expiration of a 15-calendar day waiting period following the
required filing of a Premerger Notification and Report Form by the ultimate
parent entity of the Purchaser, which the Company understands will be
submitted on July 6, 1999. Accordingly, the waiting period under the HSR Act
will expire at 11:59 p.m., New York City time, on July 21, 1999, unless early
termination of the waiting period is granted by the FTC and the Antitrust
Division, or the ultimate parent entity of the Purchaser receives a request
for additional information or documentary material prior thereto. If either
the FTC or the Antitrust Division issues a request for additional information
or documentary material prior to the expiration of the 15-day waiting period,
the waiting period will be extended and will expire at 11:59 p.m., New York
City time, on the tenth calendar day after the date of substantial compliance
by the ultimate parent entity of the Purchaser with such request unless
terminated earlier by the FTC and the Antitrust Division. If such a request is
issued, the purchase of and payment for Shares pursuant to the Offer will be
deferred until the additional waiting period expires or is terminated. Only
one extension of such waiting period pursuant to a request for additional
information or documentary material is authorized by the rules promulgated
under the HSR. Thereafter, the waiting period can be extended only by court
order or by consent of the ultimate parent entity of the Purchaser.
Item 9. Material to be Filed as Exhibits.
The following exhibits are filed herewith:
<TABLE>
<C> <S>
Exhibit 1. Pre-Acquisition Agreement, dated as of June 23, 1999, by and among
Parent, the Purchaser and the Company.
Exhibit 2. Press Release issued by the Company and Parent on June 24, 1999.
Exhibit 3. Confidentiality Agreement, dated March 19, 1999, between Parent
and the Company.
Exhibit 4. The Company's Information Statement filed pursuant to Section
14(f) of the Securities Exchange Act of 1934 and Rule 14f-1
thereunder (filed as Annex A hereto).
Exhibit 5. Letter to Shareholders dated as of June 30, 1999.
Exhibit 6. Directors' Circular dated as of June 30, 1999.
Exhibit 7. Letter Agreement between Ravine Partners, Ltd. and Titan
Acquisitions, Ltd.
Exhibit 8. Letter Agreement between Ontario Teachers Pension Plan Board and
Titan Acquisitions, Ltd.
Exhibit 9. Change in Control Agreement with W. Michael Clevy, filed as
Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1999, filed with the Commission on May
14, 1999, and is incorporated herein by reference.
Exhibit 10. Change in Control Agreement with David P. Cain, filed as Exhibit
10.12 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999, filed with the Commission on May 14,
1999, and is incorporated herein by reference.
Exhibit 11. Change in Control Agreement with Stephen L. Clanton.**
Exhibit 12. Change in Control Agreement with Douglas K. Gibbs, filed as
Exhibit 10.13 to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1999, filed with the Commission on May
14, 1999, and is incorporated herein by reference.
Exhibit 13. Change in Control Agreement with Herman V. Kling.**
Exhibit 14. Change in Control Agreement with Francis C. Harrell.**
Exhibit 15. Change in Control Agreement with Robert C. Henningsen.**
Exhibit 16. Change in Control Agreement with Augusto H. Millan.**
Exhibit 17. Change in Control Agreement with David B. Schumacher.***
Exhibit 18. Change in Control Agreement with Karla G. Smith.***
Exhibit 19. Change in Control Agreement with H. David Tayler.**
Exhibit 20. Change in Control Agreement with James R. Wiese.**
</TABLE>
19
<PAGE>
<TABLE>
<C> <S>
Exhibit 21. Termination Agreement with W. Michael Clevy, filed as Exhibit
10.14 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, filed with the Commission on March 30,
1998, and incorporated herein by reference.
Exhibit 22. Termination Agreement with Stephen L. Clanton, filed as Exhibit
10.12 to the Company's Annual Report on Form 10-K for the year
ending December 31, 1997, filed with the Commission on March 30,
1998, and incorporated herein by reference.
Exhibit 23. Termination Agreement with Herman V. Kling.****
Exhibit 24. International Comfort Products Corporation Annual and Long-Term
Incentive Plan, filed as Exhibit A to the Company's Proxy
Statement filed with the Commission on April 15, 1999, and
incorporated herein by reference.
Exhibit 25. International Comfort Products Corporation Long Term Incentive
Plan, filed as Exhibit 10.25 to ICP(USA)'s Registration Statement
on Form S-1 (File No. 33-56238), filed with the Commission on
December 23, 1992, and incorporated herein by reference.
Exhibit 26. International Comfort Products Corporation 1997 Long Term
Incentive Plan for Senior Management, filed as Exhibit 10.6 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1997, filed with the Commission on March 30, 1998, and
incorporated herein by reference.
Exhibit 27. Written opinion of Credit Suisse First Boston Corporation dated
June 23, 1999 (filed as Annex B).
</TABLE>
- --------
** Document not file because substantially identical to Exhibit 10.
*** Document not filed because substantially identical to Exhibit 12.
**** Document not filed because substantially identical to Exhibit 22.
20
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
INTERNATIONAL COMFORT PRODUCTS
CORPORATION
By: /s/ David P. Cain
-----------------------------------
David P. Cain
Senior Vice President, General
Counsel
and Secretary
Dated: June 30, 1999
21
<PAGE>
Annex A
INTERNATIONAL COMFORT PRODUCTS CORPORATION
501 Corporate Centre Drive, Suite 200
Franklin, Tennessee 37067
INFORMATION STATEMENT PURSUANT TO SECTION 14(f)
OF THE SECURITIES EXCHANGE ACT OF 1934 AND
RULE 14f-1 THEREUNDER
This Information Statement is being mailed on or about June 30, 1999 as part
of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") to holders of Ordinary Shares (the "Shares") of International Comfort
Products Corporation, a corporation continued under the federal laws of Canada
(the "Company"). Capitalized terms used herein and not otherwise defined
herein shall have the meanings set forth in the Schedule 14D-9. You are
receiving this Information Statement in connection with the designation of
persons by Titan Acquisitions, Ltd., a corporation organized under the laws of
the Canadian Province of New Brunswick ("Purchaser"), and a wholly owned
subsidiary of United Technologies Corporation, a Delaware corporation
("Parent"), to the board of directors of the Company (the "Company Board").
Such designation is to be made pursuant to a Pre-Acquisition Agreement, dated
as of June 23, 1999 (the "Pre-Acquisition Agreement"), by and among Parent,
Purchaser and the Company, whereby Purchaser has agreed to make a tender offer
(the "Offer") for all of the outstanding Shares of the Company. The Offer is
scheduled to expire at 12:00 midnight, Toronto time, on Wednesday, July 28,
1999, unless the Offer is extended or withdrawn.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
thereunder. YOU ARE URGED TO READ THIS INFORMATION STATEMENT CAREFULLY. YOU
ARE NOT, HOWEVER, REQUIRED TO TAKE ANY ACTION. WE ARE NOT NOW ASKING YOU FOR A
PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY AT THIS TIME.
GENERAL INFORMATION REGARDING THE COMPANY
The Shares are the only class of voting securities of the Company
outstanding. As of June 25, 1999, there were 40,789,128 Shares outstanding.
Each Share has one vote.
PROPOSED CHANGES TO THE COMPANY BOARD
Promptly upon the purchase by Purchaser of the outstanding Shares pursuant
to the Offer, and from time to time thereafter, Parent shall be entitled to
designate up to such number of directors, rounded up to the next whole number,
on the Company Board as shall give Parent representation on the Company Board
equal to the product of the total number of directors on the Company Board
(giving effect to the directors appointed pursuant to this sentence)
multiplied by the percentage that the aggregate number of the Shares
beneficially owned by Parent or any affiliate of Parent following such
purchase bears to the total number of Shares then outstanding, and the Company
shall, at such time, immediately take all actions necessary to cause Parent's
designees to be appointed as directors of the Company, including increasing
the size of the Company Board or securing the resignations of incumbent
directors or both.
The Company is obligated to promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in
order to fulfill such obligations (including mailing to its stockholders the
information required by such Section and Rule) and shall include in the
Schedule 14D-9 such information with respect to the Company and its officers
and directors as is required under Section 14(f) and Rule 14f-1. Parent shall
supply to the Company and be solely responsible for any information with
respect to Parent and its nominees, officers, directors and affiliates
required by such Section 14(f) and Rule 14f-1.
Following the appointment of designees of Parent and prior to consummation
of a compulsory acquisition or Second Stage Transaction (as described below),
any amendment of the Pre-Acquisition Agreement or the Company's Certificate
and Articles of Continuance or By-Laws (collectively, the "the Company
Governing
A-1
<PAGE>
Documents"), any termination of the Pre-Acquisition Agreement by the Company,
any extension by the Company of the time for the performance of any of the
obligations or other acts of Parent or waiver thereof, any waiver of any
condition to the obligations of the Company or waiver of any of the Company's
rights under the Pre-Acquisition Agreement or other action by the Company
shall require the concurrence of a majority of the directors of the Company
then in office who were not designated by Parent, which action shall be deemed
to constitute the action of the Company Board even if such majority does not
constitute a majority of all directors then in office.
PURCHASER DESIGNEES
Purchaser has informed the Company that Purchaser will choose the Purchaser
Designees from the list of persons set forth in the following table. With
respect to the Purchaser Designees, the following table, prepared from
information furnished to the Company by Purchaser, sets forth the name, age,
citizenship, present principal occupation or employment and five-year
employment history for each of the persons who may be designated by Purchaser
as Purchaser Designees. If necessary, Purchaser may choose additional or other
Purchaser Designees, subject to the requirements of Rule 14f-1. Unless
otherwise indicated below, the business address of each person is United
Technologies Corporation, One Financial Plaza, MS 524, Hartford, CT 06101, and
such person is a Canadian citizen.
<TABLE>
<CAPTION>
Present Principal Occupation or
Employment;
Material Positions Held During The Past
Name Age Five Years
---- --- ---------------------------------------
<C> <C> <S>
Dennis Moyer..................... 47 Senior Vice President, Carrier Canada
Limited
Ken Kapustiak.................... 43 Vice President (Finance) of Carrier
Canada Limited/Otis; Regional Finance
Manager, Otis; various other finance
positions with affiliates of Parent
Peter Dilmar..................... 45 Residential Sales Manager, Carrier
Canada Limited
Marisa Soulis.................... 51 Executive Assistant, Carrier Canada
Limited
William Trachsel................. 56 Senior Vice President, General Counsel
Citizenship: United States and Secretary of Parent since 1998;
previously Vice President, Secretary
and Deputy General Counsel of Parent
David Fitzpatrick................ 45 Senior Vice President and Chief
Citizenship: United States Financial Officer of Parent since 1998;
previously Vice President and
Controller, Eastman Kodak Co.; Finance
Director--Cadillac Luxury Car Division,
Chief Accounting Officer, General
Motors Corp.
Ari Bousbib...................... 38 Vice President, Strategic Planning, of
Citizenship: French/Portuguese Parent since 1997; previously Managing
Director, the Strategic Partners Group;
Partner, Booz, Allen & Hamilton
</TABLE>
Purchaser has advised the Company that to the best knowledge of Purchaser,
none of the Purchaser Designees currently is a director of, or holds any
position with, the Company, and except as disclosed in the Offer to Purchase
and Circular, none of the Purchaser Designees beneficially owns any securities
(or rights to acquire any securities) of the Company or has been involved in
any transactions with the Company or any of its directors, executive officers
or affiliates that are required to be disclosed pursuant to the rules of the
Securities and Exchange Commission (the "SEC"), except as may be disclosed in
the Offer to Purchase and Circular. None of the Purchaser Designees has any
family relationship with any director or executive officer of the Company.
Purchaser has advised the Company that each of the persons listed in the
table above has consented to act as a director, and that none of such persons
has during the last five years been convicted in a criminal proceeding
(excluding traffic violations and similar misdemeanors) or was a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was, or is, subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any
violation of such laws or is involved in any other legal proceeding which is
required to be disclosed under Item 401(f) of Regulation S-K promulgated by
the SEC.
It is expected that the Purchaser Designees may assume office promptly upon
the purchase by Purchaser of the outstanding Shares pursuant to the Offer,
which cannot be earlier than July 28, 1999, and that, upon assuming office,
the Purchaser Designees will thereafter constitute at least a majority of the
Company Board.
A-2
<PAGE>
CURRENT DIRECTORS OF THE COMPANY
The following table sets forth certain information as of June 30, 1999,
regarding the current directors of the Company. Unless otherwise indicated,
each director has been engaged in the principal occupation shown for more than
the past five years.
<TABLE>
<S> <C>
RICHARD C. BARNETT STANLEY M. BECK, Q.C.
Retired Arbitrator
Age--60 Age -- 64
Director since May 1998 Director since June 1991
W. MICHAEL CLEVY THE HONOURABLE WILLIAM G.
President and Chief Executive DAVIS, P.C., C.C., Q.C.
Officer of the Company Counsel for Tory Tory
Age--50 DesLauriers & Binnington,
Director since September 1995 Barristers & Solicitors(2)
Age -- 69
Director from August 1985 to April
1990 and since June 1992
JOHN F. FRASER, O.C. ROY T. GRAYDON
Chairman of Air Canada Portfolio Manager, Ontario
(airline company)(3) Teachers' Pension Plan Board
Age--68 (pension administrator)
Director from May 1985 to Age -- 38
April 1990 and since June Director since June 1997
1992
MARVIN G. MARSHALL ERNEST C. MERCIER
President and Chief Corporate Director(4)
Executive Officer of Age -- 66
Remington Capital Director since August 1994
Investments Limited (real
estate and related ventures)
Age -- 61
Director since August 1994
DAVID H. MORRIS DAVID A. RATTEE
Corporate Director(5) President and Chief
Age--57 Executive Officer of CIGL
Director since August 1994 Holdings Limited (insurance and
financial services holding
company)(6)
Age -- 57
Director since June 1993
RICHARD W. SNYDER WILLIAM A. WILSON
Chairman, SnyderCapital Corporation President and Chief
(investment company) Executive Officer, Fresh Air
Age--61 Solutions (developer of
Director since June 1996 air conditioning technology)
Age -- 65
Director since June 1996
</TABLE>
- --------
(1) All of the directors and nominees have had the principal occupation listed
above for the previous five years except as follows: Mr. Barnett was Vice
President and General Manager of Tyler Pipe Company (valve and
A-3
<PAGE>
fitting manufacturer) until his retirement in 1998; Mr. Clevy joined the
Company as President and Chief Operating Officer of the Company's U.S.
operating subsidiary, International Comfort Products Corporation (USA)
("ICP USA"), in September 1994. He was appointed President and Chief
Executive Officer of the Company in December 1995. Prior to joining the
Company, he was Vice President of Manufacturing and Technology of Carrier
Corporation (HVAC manufacturer); Mr. Fraser, from 1995 to 1997, was Vice
Chairman of Russel Metals Inc. (metals distribution and processing
company). Prior to that time, Mr. Fraser had served as Chairman of Federal
Industries Ltd. (transportation and distribution company) from May 1992 to
May 1995; Mr. Graydon was Vice President and Director, Mergers &
Acquisitions and Corporate Finance with Toronto-Dominion Securities Inc.
(investment bank) from 1989 until June 1995; Mr. Marshall served as
Chairman of the Board of the Company from December 1995 to June 1997. He
also previously served as President and Chief Executive Officer of Bramalea
Inc. (real estate developer); Mr. Morris, until his retirement in 1995,
served as President and Chief Operating Officer of The Toro Company
(outdoor power equipment manufacturer), a position he had held since 1988;
Mr. Rattee also is Chairman, President and Chief Executive Officer of MICC
Investments Ltd. (insurance and financial services holding company).
(2) Also serves as a director of Corel Corporation, The First American
Financial Corporation, First American Title Insurance Company, Magna
International Inc, and The Seagram Company Ltd.
(3) Also serves as a director of Air Canada, the Bank of Montreal, and The
Thomson Corporation.
(4) Also serves as a director of Cascade Corporation and Golden Star Resources
Ltd.
(5) Also serves as a director of Alamo Group Inc.
(6) Also serves as a director of Aluma Enterprises Inc. and Derlan Industries
Limited.
INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
Compensation of Directors--Standard Arrangements. Each director who is not
either the Chairman or a full-time employee of the Company is paid a fee of
$1,000 per Board meeting attended and $1,000 per committee meeting attended,
as well as an annual retainer of $20,000. In addition, the Chairman of each
committee is paid an additional annual retainer of $4,000. Directors also are
reimbursed for any out-of-pocket expenses incurred in attending meetings of
the Board or committees of the Board. Pursuant to the Company's Share
Compensation Arrangement for Non-Employee Directors, at least 20 percent, or
at an individual director's election, up to 100 percent of a director's fees,
less taxes, is to be paid in Shares, rather than cash. The number of Shares
that a director receives is determined at the end of each calendar quarter by
dividing the aggregate fees to which the director is entitled by the average
closing price of the Shares during the last five trading days of the quarter,
multiplied by 20% to 100% based upon the election of the director described
above.
Compensation of Directors--Other Arrangements. Upon Mr. Snyder becoming
Chairman in 1997, he assisted Mr. Clevy and handled various matters of
corporate business. Mr. Snyder is an ex-officio member of all committees of
the Board and attends all meetings of all Board committees. Mr. Snyder also
actively assists management in the day-to-day identification and evaluation of
strategic alternatives for the Company. Since becoming Chairman, Mr. Snyder
has received $10,000 per month for serving as Chairman. During his period of
service as Chairman, Mr. Snyder has not received any other fees (excluding
expenses) for serving as a director.
Board of Directors. The Board held eight regular meetings during 1998.
Audit Committee. The Audit Committee, which currently is comprised of
Messrs. Fraser, Graydon and Rattee, reviews the Company's financial
statements, accounting practices and business and financial controls. It also
recommends to the Board the external auditors to be appointed by the
shareholders at each annual meeting of shareholders, reviews their audit work
plan and approves their fees. The Audit Committee met five times in 1998.
Compensation and Pension Committee. The Compensation and Pension Committee,
which currently is comprised of Messrs. Beck, Davis, Morris and Wilson,
reviews and makes recommendations to the Board in
A-4
<PAGE>
respect of the overall compensation philosophy of the Company and specific
compensation policies, programs and plans. The Compensation and Pension
Committee met four times in 1998.
Nominating and Corporate Governance Committee. The Nominating and Corporate
Governance Committee, which currently is comprised of Messrs. Beck, Marshall,
and Rattee, recommends to the Board nominees for election as directors of the
Company and makes recommendations on other matters relating to corporate
governance policy. Although the Committee does not solicit suggestions for
nominees for the Board, suggestions for nominees accompanied by biographical
data will be considered if sent to the Company's Secretary. The Nominating and
Corporate Governance Committee met two times in 1998.
Strategic Planning Committee. The Strategic Planning Committee, which
currently is comprised of Messrs. Barnett, Clevy, Mercier, Morris, and Wilson,
assists in the development and updating of strategic plans for the Company's
existing businesses and reviews and considers alternative plans for growth and
diversification opportunities. The Strategic Planning Committee met two times
in 1998.
During 1998, all directors attended at least seventy-five percent of the
meetings of the Board and the committees of the Board of which they were
members.
A-5
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table discloses compensation paid or accrued in 1998 and the
two prior financial years by (i) the Chief Executive Officer of the Company,
and (ii) each of the Company's four most highly compensated executive
officers, other than the Chief Executive Officer, who continued to serve as at
December 31, 1998 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
Long-Term
Compensation(1)
Annual -----------------------
Compensation(2) Awards Payouts
------------------ ------------ ----------
Securities
Under
Options/Sars LTIP All Other
Name and Occupation Year Salary($) Bonus($) Granted(#) Payouts($) Compensation($)
------------------- ---- --------- -------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
W. Michael Clevy........ 1998 $433,500 $200,000 -- -- --
President and Chief Ex-
ecutive Officer 1997 425,000 405,500 200,000 -- --
1996 385,000 250,101 200,000 -- $206,038
David P. Cain........... 1998 $178,512 $45,217 -- -- --
Senior Vice President, 1997 175,008 70,000 50,000 -- --
General Counsel and
Secretary 1996 150,000 60,101 45,000 -- --
Stephen L. Clanton(3)... 1998 $188,712 $46,654 25,000 -- --
Senior Vice President,
Chief Financial 1997 178,754 75,000 50,000 -- --
Officer and Treasurer 1996 81,843 60,101 45,000 -- 63,416
Augusto H. Millan....... 1998 $178,512 $50,000 -- -- 10,000(4)
Senior Vice President
and General Manager, 1997 175,008 70,000 50,000 -- --
International Sales and
General Manager, 1996 150,000 60,101 45,000 -- --
Aftermarket Sales
James R. Wiese.......... 1998 $178,512 $40,000 -- 41,418 --
Senior Vice President
and General Manager, 1997 175,008 70,000 50,000 -- --
Residential Products
Group 1996 145,000 60,101 45,000 -- --
</TABLE>
- --------
(1) During the periods indicated, the Company has made no Restricted Stock
Awards to the Named Executive Officers.
(2) For 1998, 1997, and 1996, perquisites and other personal benefits did not
exceed the lesser of $50,000 and 10 percent of the total salary and bonus
for each of the Named Executive Officers.
(3) Mr. Clanton joined the Company on July 19, 1996.
(4) Represents reimbursement for moving expenses.
A-6
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets out the particulars of all grants of stock
options(1) to any of the Named Executive Officers during the Company's fiscal
year ended December 31, 1998.
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed
Annual Rates of
Stock Price
Number of Percent of Appreciation For
Securities Total Option Term
Under Options Granted Exercise or (Cdn.$)(2)
Options to Employees In Base Price Expiration ----------------
Name Granted(#) Fiscal Year (Cdn. $/Share) Date 5% 10%
---- ---------- --------------- -------------- ---------- --- --------
<S> <C> <C> <C> <C> <C> <C>
Mr. Clanton............. 25,000 6.9% $15.30 12/19/01 $74,434 $158,814
</TABLE>
- --------
(1) The exercise price of each option is equal to 100% of the fair market
value of the Shares on the date of the grant. Fair market value for the
purposes of option grants means the closing market price of the Shares on
The Toronto Stock Exchange (the "TSE") on the last trading day preceding
the date of the grant. Each option is exercisable after one year from the
date of grant as to 33 1/3% of the Shares and in cumulative increments of
33 1/3% per year thereafter.
(2) The dollar amounts under these columns are the result of calculations at
5% and 10% rates set by the SEC and, therefore, are not intended to
forecast possible future appreciation, if any, in the price of the Shares.
No benefit to the option holder is possible without an increase in the
price of the Shares. In order to realize the values set forth in the 5%
and 10% columns, the per share price would be Cdn. $18.28 and Cdn. $21.65,
respectively.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table sets forth certain information regarding outstanding
stock options held by each of the Named Executive Officers as at December 31,
1998. No options were exercised by any of the Named Executive Officers during
the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-
Options at Fiscal The-Money Options at
Year-End(#) Fiscal Year-End (CDN.$)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mr. Clevy............. 345,000 200,000 $2,764,500 $1,330,000
Mr. Cain.............. 72,000 48,000 569,900 314,100
Mr. Clanton........... 47,000 73,000 317,700 294,300
Mr. Millan............ 72,000 48,000 569,900 314,100
Mr. Wiese............. 72,000 48,000 569,900 314,100
</TABLE>
A-7
<PAGE>
PENSION PLANS
The Named Executive Officers participate in the salaried pension plan of ICP
USA (the "Pension Plan"). Pension benefits are not reduced by a participant's
social security benefits. Earnings for the purposes of the Pension Plan
benefit formula consist of the participant's average monthly base rate of pay.
The following table sets forth the estimated annual benefits payable upon
retirement at age 65 to participants, based upon the 60 consecutive months of
highest average earnings within 120 months of the date of determining
benefits.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of Service
-----------------------------------------------
Remuneration 5 10 15 20 25 30+
------------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$100,000................... $10,000 $20,000 $30,000 $40,000 $50,000 $60,000
125,000................... 12,500 25,000 37,500 50,000 62,500 75,000
160,000+.................. 16,000 32,000 48,000 64,000 80,000 96,000
</TABLE>
The maximum amount of a participant's earnings that may be taken into
account in any year is limited to an amount specified in the United States
Internal Revenue Code of 1986, as amended (the "Code"), as adjusted annually
for cost-of-living increases (such amount is $160,000 for 1998).
As at December 31, 1998, Messrs. Clevy, Cain, Clanton, Millan and Wiese had
4.3, 22.0, 2.5, 4.2 and 10.4 years of credited service, respectively, under
the Pension Plan.
In addition, Mr. Clevy has a supplemental pension plan with ICP USA which
will provide a maximum pension on retirement equal to 3 1/3% of Mr. Clevy's
average annual earnings (salary and bonus), based on three consecutive years
of highest earnings, for each year of service up to a maximum of 15 such
years, plus an additional 1% for each additional year of service up to a
maximum of 20 such additional years, less the amount payable under the Pension
Plan. Sixty percent of Mr. Clevy's pension will continue to his spouse on his
death.
The following table sets forth estimated annual amounts payable under a
supplemental pension plan before reduction for amounts payable under the
Pension Plan, if applicable.
SUPPLEMENTAL PENSION PLAN TABLE (CLEVY)
<TABLE>
<CAPTION>
Years of Service
--------------------------------------------------------------
Remuneration 5 10 15 20 25 30 35
------------ -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$400,000................ $ 66,667 $133,333 $200,000 $220,000 $240,000 $260,000 $280,000
500,000................ 83,333 166,667 250,000 275,000 300,000 325,000 350,000
600,000................ 100,000 200,000 300,000 330,000 360,000 390,000 420,000
700,000................ 116,667 233,333 350,000 385,000 420,000 455,000 490,000
800,000................ 133,333 266,667 400,000 440,000 480,000 520,000 560,000
900,000................ 150,000 300,000 450,000 495,000 540,000 585,000 630,000
</TABLE>
As at December 31, 1998, Mr. Clevy had 4.3 years of credited service under
his supplemental pension plan.
TERMINATION AND CHANGE IN CONTROL AGREEMENTS
Mr. Clevy has an agreement with ICP USA which provides that upon termination
of his employment with the Company (as defined therein), he will continue to
be entitled to receive his annual salary and other benefits he was receiving
at the time of termination for 24 months (or, at his option, he may receive a
lump sum payment equal to the aggregate face value of these amounts).
A-8
<PAGE>
Mr. Clanton has an agreement with ICP USA which provides that upon
termination of his employment with the Company (as defined therein), he will
continue to be entitled to receive his annual salary and other benefits he was
receiving at the time of termination for 12 months (or, at his option, he may
receive a lump sum payment equal to the aggregate face value of these
amounts).
The Company has also entered into contracts with each of the Named Executive
Officers that provide generally for continuation of the executive's salary for
a stated number of months following a Change in Control (the "Severance
Period") in the event of a termination of the officer's employment by the
Company other than "for cause" or as a result of death or disability. In
addition, the executive will receive, in such event, on an annual basis,
during the Severance Period, an amount equal to the average of the executive's
bonus during the three years prior to termination. For Mr. Clevy, the
Severance Period is 36 months; for Messrs. Cain, Clanton, Millan and Wiese,
the Severance Period is 24 months. Additionally, the contracts provide that
the officers shall be paid such amounts if the officer voluntarily terminates
his employment with the Company if, after a Change in Control: (a) a material
change in the executive's duties and responsibilities for the Company from
those duties and responsibilities for the Company in effect at the time a
Change in Control occurs, which change results in the assignment of duties and
responsibilities inferior to the executive's duties and responsibilities at
the time such Change in Control occurs; (b) a reduction in the executive's
salary and benefits (excluding discretionary bonuses), from the salary and
benefits in effect at the time a Change in Control occurs; (c) a change in the
location of the executive's work assignment from the location at the time a
Change in Control occurs to any other city or geographical location that is
located further than one hundred (100) miles from that location; or (d) the
Company terminates or amends any incentive plan so that, when considered in
the aggregate with any substitute plan or other substitute compensation, the
incentive plan in which the executive is participating fails to provide the
executive with a level of benefits equivalent to at least 85% of the value of
the level of benefits provided in the aggregate by the terminated or amended
incentive plan at the date of such termination or amendment. These contracts
generally provide for an excise tax gross-up with respect to any taxes
incurred under Section 4999 of the Code after a Change in Control.
Additionally, these contracts provide for an extension of life insurance,
medical insurance, and other employment benefits throughout the executive's
applicable Severance Period. A "Change in Control" occurs when a person (other
than the executive or a group of which
the executive is a member or participant) becomes the beneficial owner,
directly or indirectly, of 50% or more of the then outstanding Shares. Any
executive who is a party to both a termination agreement and a change in
control agreement may not receive benefits under both agreements.
COMPENSATION AND PENSION COMMITTEE INTERLOCKS AND INSIDE PARTICIPATION
The following individuals served as members of the Compensation and Pension
Committee during 1998: Prior to May 13, 1998, the Hon. William G. Davis, P.C.,
C.C., Q.C., Stanley M. Beck, Q.C., and David H. Morris; after May 13, 1998,
the Hon. William G. Davis, P.C., C.C., Q.C., Stanley M. Beck, Q.C., David H.
Morris, and William A. Wilson. None of the directors who served as members of
the Committee during 1998 is, or has ever been, an officer or an employee of
the Company or any of its subsidiaries.
REPORT OF THE COMPENSATION AND PENSION COMMITTEE
The Compensation and Pension Committee of the Board of Directors (the
"Committee") reviews and makes recommendations to the Board in respect of the
overall compensation philosophy of the Company and specific compensation
policies, programs and plans. The Committee also reviews and makes
recommendations to the Board in respect of the compensation to be paid to the
Chief Executive Officer and, after considering the recommendations of the
Chief Executive Officer, to the other officers of the Company and its
principal operating subsidiaries, ICP USA and International Comfort Products
Corporation (Canada). The Committee retains the services of independent
consultants to advise it on such matters as the structuring of compensation
arrangements, design of compensation and benefit plans and competitive
benchmarking. The Committee retained the services of a consultant from
Deloitte & Touche to advise it with respect to executive compensation matters
in 1998.
A-9
<PAGE>
When determining the appropriate levels of executive compensation to be
recommended to the Board for approval, the Committee utilizes various
information sources, including data prepared by independent consultants. The
Committee also considers the Company's performance, viability, the integrity
of its assets, future outlook, ethical standards related to its role as a
worldwide corporate citizen and applicable tax, securities and other
regulations affecting the Company. As the Company's business is carried on
principally in the United States, pay levels and practices for executives
resident in the United States or with significant North American
responsibilities are established with reference to those of U.S. industrial
companies of similar size and complexity but are paid in the currency of the
country in which the executive is resident without taking currency exchange
rates into account. Pay levels and practices in respect of executives resident
in Canada who do not have broader geographical responsibilities are
established with reference to a similar sample of Canadian organizations. In
each case, the comparator groups were selected by the Committee as they are
considered to be the prime sources of management resources for the Company as
well as the principal competitors for management talent.
General Strategy
The executive compensation strategy is a guideline for policy formulation
and decision-making that aligns the Company's human resources and business
strategies. The Company believes that effective compensation plans must be
performance-based, cost-effective and must maximize long-term shareholder
value. The Committee reviews ICP's compensation strategy, market-
competitiveness and plan effectiveness annually at minimum.
Base Salary
ICP base salaries are generally competitive with the market median, relative
to similar job scope and company size. The relative significance of ICP base
salaries is subordinate to variable, performance-based compensation
components. Therefore, when base salary increases are granted, they typically
consist of
competitive market and internal equity adjustments. Adjustments are not
necessarily made at set intervals, but are made when significant variance from
the market exists.
ICP may also award lump sum base salary increases based on the achievement
of previously determined corporate and individual Performance Management
Program goals. Lump-sum increases, when awarded, do not change the
individual's rate of base salary.
Incentive Compensation
ICP pays total cash compensation levels (base salaries plus annual
incentives) and total direct compensation levels (total cash plus long-term
incentives) which are market competitive when budgeted expectations are met,
and highly competitive when expectations are exceeded. No incentive
compensation is paid when performance results fall below a pre-established
threshold level.
The Committee recommends to the Board target, threshold and maximum
incentive performance and award levels for all participants. Once approved by
the Board, these levels are communicated for each position, level or group.
ICP may also recognize extraordinary achievement through discretionary
incentive awards.
Annual Incentive Compensation
ICP's short-term incentive plan for executives is a simple formula-based
design that rewards executives for the achievement of short-term goals, which
create growth and profitability. Short-term incentives for other managers and
salaried employees take the form of annual incentive plans, lump-sum salary
increases, sales commissions and the like, that best reflect and motivate each
position's contribution to the achievement of short-term goals and objectives.
A-10
<PAGE>
Long-Term Incentives
ICP's long-term incentive plans reward the achievement of long-term growth,
profitability, shareholder value and stock price appreciation; reward team
effort; and serve to closely align shareholder interests and organizational
success with the executive's personal, financial and career interests. ICP
provides long-term compensation opportunities in the form of stock options or
stock grants and deferred cash compensation. Plan designs enhance the
retention of executive talent and discourage behavior that does not further
the overall long-term good of the organization. As such, long-term awards are
subject to vesting or other long-term capital accumulation restrictions.
Compensation of the Chief Executive Officer
The Chief Executive Officer's compensation program has the same components
as those described for the other members of the executive officer group: base
salary, annual incentive and long-term incentive. The Chief Executive
Officer's compensation program is established with reference to the comparator
groups described above. The Committee makes recommendations to the Board
regarding the Chief Executive Officer's compensation on the same performance-
related basis as for the other executive officers.
Section 162(m) of the Code limits to $1 million per year the compensation
expense deduction the Company may take under United States federal tax laws
for non-performance-based compensation paid to a person who is "highly-
compensated" for purposes of the Code (generally, the CEO and other Named
Executive Officers). In making its decisions about compensation for Mr. Clevy
and other officers likely to be named executive officers, the Committee
considers Section 162(m). Although the Company's compensation levels have not
historically resulted in total compensation in excess of $1 million (excluding
the spread on stock option exercises which generally should qualify for
deductibility under Section 162(m)) for Named Executive Officers other than
Mr. Clevy, it is generally the policy of the Company that the components of
executive compensation that are inherently performance-based should qualify
for exclusion from the deduction limitation under Section 162(m).
The Committee believes, however, that while tax deductibility is an
important factor, it is not the sole factor to be considered in setting
executive compensation policy, and accordingly reserves the right, in
appropriate circumstances, to pay amounts, in addition to base salary, that
might not be deductible. If non-performance-based compensation in excess of $1
million should become payable to a person who is "highly-compensated" for
purposes of the Code and regulations, the Committee will consider requiring
that individual to defer any amounts earned in excess of the cap to a tax year
following the year in which the individual leaves the employment of the
Company.
Submitted by the Compensation and Pension
Committee of the Board:
The Hon. William G. Davis, P.C., C.C., Q.C.
(Chairman)
Stanley M. Beck, Q.C.
David H. Morris
William A. Wilson
A-11
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Except as set forth in the following table, the Company is not aware of any
person who, as of June 30, 1999, was the beneficial owner of 5% or more of the
Shares.
<TABLE>
<CAPTION>
Amount and
Nature of Percent of
Beneficial Class
Name and Address of Beneficial Owner Ownership (fully diluted)
------------------------------------ ---------- ---------------
<S> <C> <C>
Ravine Partners, Ltd
3219 McKinney Avenue
Dallas, Texas 75204 ....................... 8,304,111(1) 19.4%
Ontario Teachers' Pension Plan Board
5650 Yonge Street, 5th Floor
North York, Ontario M2M 4H5................ 7,916,638 18.4%
</TABLE>
- --------
(1) Includes 414,241 Shares owned by Richard W. Snyder, a director of the
Company, who is a general partner of Ravine Partners, Ltd.
A-12
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information concerning the beneficial
ownership of Shares by all directors, by each of the executive officers named
in the Summary Compensation Table beginning on page A-6 and by all directors
and executive officers as a group.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent of
Name of Beneficial Owner Ownership(1) Class(2)
------------------------ ------------ ----------
<S> <C> <C>
Richard C. Barnett............................. 3,389 *
Stanley M. Beck, Q.C........................... 2,723 *
W. Michael Clevy............................... 456,772(3) *
The Honourable William G. Davis, P.C.,
C.C., Q.C..................................... 2,337 *
John F. Fraser, O.C............................ 5,171 *
Roy T. Graydon................................. 7,919,638(4) 18.4%
Marvin G. Marshall............................. 18,183 *
Ernest C. Mercier.............................. 9,800 *
David H. Morris................................ 3,585 *
David A. Rattee................................ 21,568(5) *
Richard W. Snyder.............................. 8,304,111(6) 19.4%
William A. Wilson.............................. 11,634 *
David P. Cain.................................. 118,929(3) *
Stephen L. Clanton............................. 87,921(3) *
Augusto H. Millan.............................. 119,615(3) *
James R. Wiese................................. 152,044(3) *
All directors and executive officers
as a group (22 persons)....................... 17,657,195(3) 41.22%
</TABLE>
- --------
(1) Includes Shares that any person has the right to acquire within 60 days of
the Record Date. Ownership is direct unless otherwise noted.
(2) An asterisk (*) in this column denotes ownership of less than one percent
of the outstanding Shares as of the Record Date.
(3) Includes Shares subject to options that currently are exercisable as
follows: Mr. Clevy (425,000); Mr. Cain (91,000); Mr. Clanton (74,333); Mr.
Millan (91,000); Mr. Wiese (91,000); all executive officers as a group
(1,120,083).
(4) Includes 7,916,638 Shares owned by the Ontario Teachers' Pension Plan
Board, of which Mr. Graydon is an employee. Mr. Graydon disclaims any
beneficial interest in these Shares.
(5) Includes 6,125 Shares owned by Mr. Rattee's spouse.
(6) Includes 7,889,870 Shares owned by Ravine Partners, Ltd., of which Mr.
Snyder is a general partner.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors,
executive officers, and any persons holding more than ten percent of the
Shares are required to report their ownership of the Shares and any changes in
that ownership to the United States Securities and Exchange Commission ("SEC")
and the American Stock Exchange ("AMEX"). These persons also are required by
SEC regulations to furnish the Company with copies of these reports. Specific
due dates for these reports have been established and the Company is required
to report in this Proxy Circular any failure to file such reports by these
dates during the Company's 1998 fiscal year. Based solely on a review of the
reports furnished to the Company and written representations from the
Company's directors and executive officers, the Company believes that all of
these filing requirements were satisfied by the Company's directors, executive
officers, and ten percent holders during 1998 except as follows: Mr. Graydon,
pursuant to the Company's Share Compensation Arrangement for Non-Employee
Directors, receives a portion of his directors' fees in Shares. Mr. Graydon,
however, as a representative of the Ontario Teachers' Pension Plan
A-13
<PAGE>
Board ("Teachers"), assigns all Shares so received to Teachers. Mr. Graydon's
receipt and assignment of all such Shares to Teachers during 1998 were timely
reported by Mr. Graydon; however, their receipt was not reported by Teachers
until it filed a Form 5 on February 17, 1999, which was one (1) day late.
PERFORMANCE GRAPHS
The following graph provides a five year comparison of cumulative total
return performance of an initial investment in Shares on December 31, 1993, of
Cdn. $100, versus the cumulative total return of the TSE 300 Composite Index.
The year-end values of each investment shown on the graph are based on share
price appreciation or depreciation plus, in the case of the TSE 300 Composite
Index, dividend re-investment.
<TABLE>
<CAPTION>
International TSE 300
--------------------------------------------------------------------------
Measurement Period Comfort Composite
(Fiscal Year Covered) Products Index
--------------------- -------- ---------
<S> <C> <C>
12/31/93............................................... 100 100
12/31/94............................................... 075 100
12/31/95............................................... 036 114
12/31/96l.............................................. 091 147
12/31/97............................................... 267 169
12/31/98............................................... 273 166
</TABLE>
The following graph provides a five year comparison of cumulative total
return performance of an initial investment in Shares on December 31, 1993, of
U.S. $100, versus the cumulative total return of the Standard and Poor's (the
"S&P") Midcap 400 Index, and the Industrial Component of the S&P Midcap 400
Index. The year-end values of each investment shown on the graph are based on
share price appreciation or depreciation plus, in the case of each index,
dividend re-investment.
<TABLE>
<CAPTION>
Industrial
Component of
International S&P
--------------------------------------------------------------------------
S&P
Midcap Midcap
Measurement Period Comfort 400 400
(Fiscal Year Covered) Products Index Index
--------------------- -------- ------ ------
<S> <C> <C> <C>
12/31/93........................................... 100 100 100
12/31/94........................................... 69 96 99
12/31/95........................................... 37 126 125
12/31/96........................................... 88 150 148
12/31/97........................................... 258 199 184
12/31/98........................................... 246 237 225
</TABLE>
CERTAIN TRANSACTIONS
During 1998, except as disclosed above under "Compensation of Executive
Officers," and except as set forth below, the Company's executive officers and
directors did not have significant business relations with the Company
requiring disclosure under applicable regulations and no such transactions are
anticipated during fiscal year 1999.
Mr. Snyder is a general partner of Ravine Partners, Ltd. ("Ravine"), a Texas
limited partnership. On April 30, 1996, Mr. Snyder, Ravine and Roberta W.
Snyder, a general partner of Ravine, (collectively, the "Snyder Group")
entered into an agreement (the "Snyder Group Agreement") with the Company
relating to the Snyder Group's shareholdings which provides for, among other
things, a prohibition on the acquisition by the Snyder Group of in excess of
20 percent of the outstanding Shares or the sale by the Snyder Group of any
Shares to a buyer who after such sale would own in excess of 20 percent of the
outstanding Shares, without first having offered the Shares to the Company or
a third party buyer arranged by the Company. The Snyder Group Agreement was
amended in July 1997 to provide for an exception to the prohibition of the
acquisition by the Snyder Group of more than 20 percent of the outstanding
Shares in the circumstances of the issuance of Shares to Mr. Snyder in his
capacity as a director or Chairman of the Company pursuant to the Company's
Share Compensation Arrangement for Non-Employee Directors.
A-14
<PAGE>
B-1
CREDIT FIRST Credit Suisse First Boston Corporation
SUISSE BOSTON Eleven Madison Avenue Telephone 212 325 2000
New York, NY 10010-3629
June 23, 1999
Board of Directors
International Comfort Products Corporation
501 Corporate Centre Drive, Suite 200
Franklin, Tennessee 37067
Members of the Board:
You have asked us to advise you with respect to the fairness to the shareholders
of International Comfort Products Corporation (the "Company") from a financial
point of view of the consideration to be received by such shareholders pursuant
to the terms of the Pre-acquisition Agreement (the "Pre-acquisition Agreement")
among the Company, United Technologies Corporation (the "Acquiror") and Titan
Acquisitions, Ltd., a wholly owned subsidiary of the Acquiror ("Acquisition
Subsidiary"). The Pre-acquisition Agreement provides, among other things, for
(i) the commencement by Acquisition Subsidiary of a tender offer (the "Tender
Offer") for all outstanding ordinary shares of the Company (the "Shares") at a
purchase price of $11.75 per Share in cash and (ii) the consummation of a Second
Stage Transaction (as defined in the Pre-Acquisition Agreement) in which all
remaining Shares will be acquired for not less than $11.75 per Share in cash.
In arriving at our opinion, we have reviewed certain publicly available business
and financial information relating to the Company, as well as a draft dated June
23, 1999 of the Pre-acquisition Agreement. We have also reviewed certain other
information, including financial forecasts, provided to us by the Company and
have met with the management of the Company to discuss the business and
prospects of the Company. We have also considered certain financial and stock
market data of the Company, and we have compared that data with similar data for
other publicly held companies in businesses similar to those of the Company and
we have considered the financial terms of certain other business combinations
and other transactions which recently have been effected. We have also
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which we deemed
relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. With respect to the
financial forecasts, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
Company's management as to the future financial performance of the Company.
<PAGE>
B-2
In addition, we have not been requested to make, and have not made, an
independent evaluation or appraisal of the assets or liabilities (contingent or
otherwise) of the Company, nor have we been furnished with any such evaluations
or appraisals. Our opinion is necessarily based upon financial, economic, market
and other conditions as they exist and can be evaluated on the date hereof. In
connection with our engagement, we approached third parties to solicit
indications of interest in a possible acquisition of the Company and held
preliminary discussions with certain of these parties prior to the date hereof.
We have acted as financial advisor to the Board of Directors of the Company in
connection with the Tender Offer and the Second-Stage Transaction and will
receive a fee for our services, a significant portion of which is contingent
upon the consummation of the Tender Offer. In the past, we have performed, and
may from time to time perform, investment banking services for the Company and
the Acquiror, and have received customary fees for such services. In the
ordinary course of our business, we and our affiliates may actively trade the
debt and equity securities of both the Company and the Acquiror for our own
accounts and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.
It is understood that this letter is for the information of Board of Directors
of the Company in connection with its consideration of the Tender Offer and the
Second-Stage Transaction and does not constitute a recommendation to any
shareholder of the Company as to whether or not such shareholder should tender
its Shares pursuant to the Tender Offer or vote its Shares in favor of any
Second-Stage Transaction. This letter is not to be quoted or referred to, in
whole or in part, in any registration statement, prospectus or proxy statement,
or in any other document used in connection with the offering or sale of
securities, nor shall this letter be used for any other purposes, without our
prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the consideration to be received by the shareholders of the Company in
the Tender Offer and the Second-Stage Transaction is fair to such shareholders
from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
<PAGE>
EXHIBIT 1
PRE-ACQUISITION AGREEMENT
BETWEEN
UNITED TECHNOLOGIES CORPORATION
AND
TITAN ACQUISITIONS, LTD.
AND
INTERNATIONAL COMFORT PRODUCTS CORPORATION
DATED June 23, 1999
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
INTERPRETATION
1.1 Definitions........................................... 2
1.2 Singular, Plural, etc................................. 7
1.3 Deemed Currency....................................... 7
1.4 Headings, etc......................................... 7
1.5 Date for any Action................................... 7
1.6 Governing Law......................................... 7
1.7 Attornment............................................ 7
ARTICLE 2
THE OFFER
2.1 The Offer............................................. 8
2.2 ICP Directors' Circular............................... 9
2.3 Offer Documents....................................... 10
2.4 Outstanding Stock Options............................. 11
ARTICLE 3
PUBLICITY AND SOLICITATION
3.1 Publicity............................................. 12
3.2 Solicitation.......................................... 12
ARTICLE 4
TRANSACTIONS FOLLOWING COMPLETION OF THE OFFER
4.1 Second Stage Transaction.............................. 12
4.2 Information Circular, Etc............................. 12
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF UTC AND UTCSUB
5.1 Organization and Qualification........................ 13
5.2 Authority Relative to this Agreement.................. 13
5.3 No Violations......................................... 13
5.4 Funds Available....................................... 14
5.5 Litigation............................................ 14
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF ICP
6.1 Organization and Qualification........................ 15
6.2 Authority Relative to this Agreement.................. 15
6.3 No Violations......................................... 15
6.4 Capitalization........................................ 16
6.5 No Material Adverse Effect............................ 17
6.6 No Undisclosed Material Liabilities................... 17
<PAGE>
TABLE OF CONTENTS
(continued)
Page
6.7 Brokerage Fees....................................... 17
6.8 Conduct of Business.................................. 17
6.9 Reports.............................................. 18
6.10 U.S. Registration.................................... 19
6.11 Subsidiaries......................................... 19
6.12 Litigation........................................... 19
6.13 Insurance............................................ 19
6.14 Environmental........................................ 20
6.15 Benefit Plans........................................ 20
6.16 Tax Matters.......................................... 21
6.17 Year 2000............................................ 22
6.18 Compliance........................................... 22
6.19 Debt Covenant........................................ 23
ARTICLE 7
CONDUCT OF BUSINESS
7.1 Conduct of Business by ICP............................ 23
ARTICLE 8
COVENANTS OF ICP
8.1 No Solicitation....................................... 25
8.2 ICP Board of Directors................................ 26
ARTICLE 9
COVENANTS OF UTC AND UTCSUB
9.1 Regulatory and Other Authorizations: Consents......... 27
9.2 Employment Agreements................................. 27
9.3 Officers' and Directors' Insurance.................... 27
9.4 Employment Termination................................ 28
9.5 Indemnities........................................... 28
9.6 Compensation; Benefit Plans........................... 28
ARTICLE 10
MUTUAL COVENANTS
10.1 Notification of Certain Matters....................... 29
10.2 Competition Filings and Investment Canada Act Filing.. 29
10.3 Other Filings......................................... 30
10.4 Additional Agreements................................. 30
10.5 Access to Information................................. 31
10.6 Debt Obligations...................................... 31
ARTICLE 11
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination........................................... 31
ii
<PAGE>
TABLE OF CONTENTS
(continued)
Page
11.2 Effect of Termination and Other Events................ 32
11.3 Amendment............................................. 33
11.4 Waiver................................................ 33
ARTICLE 12
GENERAL PROVISIONS
12.1 Notices............................................... 34
12.2 Miscellaneous......................................... 35
12.3 Assignment............................................ 35
12.4 Expenses.............................................. 35
12.5 Severability.......................................... 35
12.6 Survival.............................................. 36
12.7 Counterpart Execution................................. 36
iii
<PAGE>
PRE-ACQUISITION AGREEMENT
THIS AGREEMENT made the 23rd day of June, 1999,
BETWEEN:
UNITED TECHNOLOGIES CORPORATION, a corporation duly incorporated under and
governed by the laws of the State of Delaware and having its principal
office in the City of Hartford, in the State of Connecticut (hereafter
referred to as "UTC"),
- and -
TITAN ACQUISITIONS, LTD., a corporation duly incorporated under and
governed by the laws of the Province of New Brunswick and having its
registered office in the City of St. John, in the Province of New Brunswick
(hereafter referred to as "UTCSub"),
- and -
INTERNATIONAL COMFORT PRODUCTS CORPORATION, a corporation duly continued
under and governed by the federal laws of Canada and having its registered
office in the City of Toronto, in the Province of Ontario (hereafter
referred to as "ICP"),
WHEREAS the Board of Directors of each of UTC and ICP has determined that it is
in the best interests of their respective corporations and shareholders that UTC
and ICP combine their business interests with the result that there shall be one
economic enterprise and that such combination be effected through an offer by
UTCSub, a wholly-owned subsidiary of UTC, to purchase all of the outstanding
ordinary shares of ICP;
AND WHEREAS the Board of Directors of ICP has unanimously determined to
recommend acceptance of the UTCSub offer to the shareholders of ICP;
AND WHEREAS the Board of Directors of ICP has unanimously determined that it
would be in the best interests of ICP and its shareholders to enter into this
Agreement;
AND WHEREAS UTC, through UTCSub, is willing to make an offer subject to the
terms and conditions of this Agreement.
NOW THEREFORE IN CONSIDERATION OF the mutual covenants hereinafter contained and
other good and valuable consideration (the receipt and adequacy whereof is
hereby acknowledged), the parties hereto agree as follows:
<PAGE>
ARTICLE 1
INTERPRETATION
1.1 Definitions
In this Agreement, unless there is something in the subject matter or context
inconsistent therewith:
"Agreement", "this Agreement", "herein", "hereto" and "hereof' and similar
expressions refer to this Agreement, as the same may be amended or supplemented
from time to time;
"Business Day" means any day excepting a Saturday, Sunday or any other day on
which banking institutions in New York City (in the State of New York) or
Toronto (in the Province of Ontario) are authorized or required by any
applicable law to close;
"Canada BCA" means the Canada Business Corporations Act as the same has been and
may hereafter from time to time be amended;
"Competition Act" means the Competition Act (Canada), as the same has been and
may hereafter from time to time be amended;
"Confidentiality Agreement" has the meaning set forth in Section 2.2(a);
"diluted basis" means, with respect to the number of outstanding ICP Shares at
any time, such number of outstanding ICP Shares calculated on the basis that all
outstanding options and other rights to purchase ICP Shares are exercised;
"Disclosure Schedule" means a letter from ICP to UTC dated the date hereof
containing disclosures made by ICP pursuant to this Agreement;
"Effective Time" means the time that UTCSub shall have acquired ownership of and
paid for ICP Shares pursuant to the terms of the Offer;
"Exchange Act" means the United States Securities Exchange Act of 1934, as the
same has been and may hereafter from time to time be amended;
"Expiry Time" means the Initial Expiry Time unless the Offer has been extended,
in which case it means the expiry time of the Offer as extended from time to
time;
"Governmental Authority" means any government, parliament, legislature,
regulatory authority, governmental department, agency, commission, board,
tribunal, crown corporation, court or other law, rule or regulation-making
entity having jurisdiction or exercising executive, legislative, judicial,
regulatory or administrative powers on behalf of any federation of nations,
nation, or any province, territory, state or other subdivision thereof or any
municipality, district or other subdivision thereof;
2
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"Governmental Order" means any order, writ, judgment, injunction, decree,
stipulation, determination, award, directive, or citation entered by or with any
Governmental Authority and having force of law;
"HSR Act" means the United States Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as the same has been amended and may hereafter from time to time be
amended;
"ICP Governing Documents" means the Certificate and Articles of Continuance and
By-laws of ICP;
"ICP Options" means the outstanding options to acquire ICP Shares under the
Stock Option Plans;
"ICP Shares" means ordinary shares in the share capital of ICP;
"in writing" means information delivered in a written form, whether by mail,
telecopy or other transmitted means, and includes documents, files, records,
books and other materials made available, delivered or produced to UTC by or on
behalf of ICP in the course of UTC conducting its due diligence review in
respect of ICP and its subsidiaries between the date of the Confidentiality
Agreement and the date of this Agreement;
"Information Circular" has the meaning set forth in Section 4.2;
"Initial Expiry Time" means 11:59 p.m. (Toronto time) on the day which is the
twentieth (20th) Business Day from and including the day that the Offer
Documents are filed with the appropriate Securities Authorities and mailed to
shareholders of ICP;
"Investment Canada Act" means the Investment Canada Act, as the same has been
amended and may hereafter from time to time be amended;
"Lockup Agreements" mean the letter agreements dated the date hereof between
UTCSub and each of Ravine Partners, Ltd. and Ontario Teachers' Pension Plan
Board;
"Material Adverse Effect" means any effect on the business, operations, results
of operations or financial condition of ICP or any of its subsidiaries that,
individually or in the aggregate, is materially adverse to the business of ICP
and its subsidiaries considered as a whole, other than any such effect (i) which
arises out of a matter that has been publicly disclosed prior to the date of
this Agreement or otherwise disclosed in the Disclosure Schedule, (ii) resulting
from conditions affecting the residential and light commercial air conditioning
and heating product industries in Canada and the United States, (iii) resulting
from general economic, financial, currency exchange, securities or commodity
market conditions in Canada, the United States or elsewhere or (iv) resulting
solely from the public announcement of the transactions contemplated by this
Agreement;
"Offer" has the meaning set forth in Section 2.1 (a);
"Offer Conditions" mean the following conditions to the Offer:
3
<PAGE>
(a) at the Expiry Time, the number of ICP Shares that shall have been validly
deposited under the Offer (and not properly withdrawn), together with any
ICP Shares held by or on behalf of UTC, or any of its subsidiaries, shall
constitute at least 71.0% of the outstanding ICP Shares (calculated on a
diluted basis);
(b) all material requisite governmental and regulatory approvals and consents
(including, without limitation, those of any stock exchanges or Securities
Authorities) required in UTC's reasonable judgment to make lawful the
purchase by, or the sale to, UTCSub of the ICP Shares (whether under the
Offer, a compulsory acquisition or Second Stage Transaction) shall have
been obtained and all applicable statutory or regulatory waiting periods
during the pendency of which the purchase by, or the sale to, UTCSub of the
ICP Shares would be illegal shall have expired or been terminated without
the imposition of any conditions that, individually or in the aggregate,
have or are reasonably likely to have the consequences referred to in
clauses (i) through (iii) of paragraph (c) below; without limiting the
foregoing: (i) the applicable waiting periods under the HSR Act and the
Competition Act with respect to the Offer shall have expired or been
terminated; (ii) the Offer shall have been approved or deemed to be
approved or exempted pursuant to the Investment Canada Act; and (iii) all
other consents and approvals without which in UTC's reasonable judgment the
purchase by, or the sale to, UTCSub of the ICP Shares (whether under the
Offer, a compulsory acquisition or Second Stage Transaction) would be
illegal have been obtained;
(c) no statute, rule, regulation, executive or other order shall have been
enacted, issued, promulgated or enforced by any Governmental Authority and
no preliminary or permanent injunction, temporary restraining order or
other legal restraint or prohibition shall have been threatened or issued
by (and no action, proceeding or counterclaim shall be pending or
threatened by or before) a court or other Governmental Authority (i)
preventing or rendering, or seeking to prevent or render, illegal the
making of the Offer, the acceptance for payment of, the payment for, or
ownership, directly or indirectly, of some or all of the ICP Shares by
UTCSub or the completion of a compulsory acquisition or Second Stage
Transaction, (ii) imposing or confirming, or seeking to impose or confirm,
limitations on the ability of UTC or UTCSub, directly or indirectly,
effectively to acquire or hold or to exercise full rights of ownership of
the ICP Shares or otherwise control ICP, in a manner that, in the
reasonable judgment of UTC, would reasonably be expected, in the aggregate,
to materially impair the overall benefits to be realized by UTC from
consummation of the Offer and the other transactions contemplated by this
Agreement, or (iii) requiring, or seeking to require, divestiture by
UTCSub, directly or indirectly, of any ICP Shares or requiring UTCSub, UTC,
ICP or any of their respective subsidiaries or affiliates to dispose of or
hold separate all or any portion of their respective businesses, assets or
properties or imposing any limitations on the ability of any of such
entities to conduct their respective businesses or own such assets,
properties or the ICP Shares or on the ability of UTC or UTCSub to conduct
the business of ICP and its subsidiaries and own the assets and properties
of ICP and its subsidiaries, in each case under this clause (iii) in a
manner that, in the reasonable judgment of
4
<PAGE>
UTC, would reasonably be expected, in the aggregate, to materially impair
the overall benefits to be realized by UTC from consummation of the Offer
and the other transactions contemplated by this Agreement;
(d) (i) ICP shall not have breached, or failed to comply with, in any material
respect, any of its covenants or other obligations under this Agreement,
and (ii) each of the representations and warranties of ICP contained in
this Agreement that is qualified as to materiality shall be so true and
correct and any such representation or warranty that is not so qualified
shall be so true and correct, in all material respects, as of the date of
this Agreement and as of the Expiry Time as if made on and as of the Expiry
Time (except to the extent such representations and warranties speak as of
a specific date, which shall be so true and correct as of such date);
provided that in either case ICP has been given notice of and ten (10)
Business Days to cure any such misrepresentation, breach or non-performance
or such misrepresentation, breach or non-performance by its timing or
nature cannot be cured before such tenth Business Day;
(e) at any time after date of this Agreement, there shall not have occurred any
event, occurrence, development or state of circumstances that has had a
Material Adverse Effect;
(f) there shall not have occurred, developed or come into effect or existence
any event, action, state, condition or major financial occurrence of
national or international consequence or any law, regulation, action,
governmental regulation, inquiry or other occurrence of any nature
whatsoever which, in the reasonable judgment of UTC, materially adversely
affects or involves, the general economic, financial, currency exchange,
securities or commodity market operations in Canada or the United States;
(g) neither ICP nor any of its subsidiaries (or the Board of Directors or any
committee thereof of ICP) shall have approved, recommended, authorized,
proposed, filed a document with any Securities Authorities not opposing, or
publicly announced its intention to enter into, any Take-over Proposal
(other than with UTCSub or any of its affiliates) and shall not have
resolved to do any of the foregoing;
(h) this Agreement shall not have been terminated pursuant to its terms; and
(i) the Board of Directors or any committee thereof of ICP shall not have
modified or amended in any manner adverse to UTC or UTCSub, and shall not
have withdrawn, its authorization, approval or recommendation of the Offer
or this Agreement and shall not have resolved to do any of the foregoing.
The foregoing conditions are for the sole benefit of UTC and UTCSub and may be
asserted regardless of the circumstances (including any action or inaction by
UTC or UTCSub or any of their affiliates giving rise to any such condition) or
waived by UTC or UTCSub in whole or in part at any time from time to time in its
discretion subject to the terms and conditions of this Agreement. The failure
of UTC or UTCSub at any time to exercise any of the foregoing rights
5
<PAGE>
shall not be deemed a waiver of any such right and each such right shall be
deemed an ongoing right which may be asserted at any time and from time to time.
"Offer Documents" has the meaning set forth in Section 2.3(a);
"Officer Obligations" means any existing written obligations or liabilities of
ICP or any of its subsidiaries to pay any amount to its officers, directors or
employees, other than for salary, bonuses under their existing bonus
arrangements and directors' fees in the ordinary course and, without limiting
the generality of the foregoing, shall include the obligations of ICP or any of
its subsidiaries to officers or employees, in each case to the extent disclosed
in the Disclosure Schedule or the SEC Reports (i) for severance or termination
payments on the change of control of ICP pursuant to any executive involuntary
severance and termination agreements in the case of officers and pursuant to
ICP's severance policy in the case of employees, and (ii) for retention bonus
payments pursuant to any retention bonus program;
"SEC" means the United States Securities and Exchange Commission;
"SEC Reports" means annual and periodic reports, proxy materials and
registration statements required to be filed by ICP and its subsidiaries with
the SEC pursuant to applicable Securities Laws;
"Second Stage Transaction" has the meaning set forth in Section 4.1;
"Securities Authorities" means the appropriate securities commissions or similar
regulatory authorities in Canada and each of the provinces and territories
thereof and in the United States and each of the states thereof;
"Securities Laws" means, collectively, the Canada BCA, any applicable Canadian
provincial securities laws or United States federal securities laws, the "blue
sky" or securities laws of the states of the United States and any other
applicable securities laws;
"Stock Option Plans" means the Employee Stock Option Plan and the 1998 Employee
Stock Option Plan of ICP;
"subsidiary" has the meaning set forth in the Canada BCA;
"Superior Take-over Proposal" means any written unsolicited Take-over Proposal
(i) which, in the opinion of ICP's Board of Directors, after consulting with and
receipt of advice from Credit Suisse First Boston Corporation, ICP's independent
financial advisor (or any other nationally recognized investment banking firm),
is more favourable to ICP's shareholders from a financial point of view than the
Offer (including, and after considering, any adjustment to the terms and
conditions proposed by UTC and UTCSub in response to such Take-over Proposal),
and (if such Take-over Proposal includes cash as consideration) that sufficient
financing commitments have been obtained with respect to such Take-over Proposal
that it reasonably expects a transaction pursuant to such proposal could be
consummated and that such transaction is reasonably capable of being consummated
without material delay taking into account all legal, accounting, regulatory and
other aspects of such Take-over Proposal; and (ii) in respect of which UTC has
received a copy of such Take-over Proposal as executed by the party making the
proposal, at
6
<PAGE>
least 48 hours prior to acceptance or recommendation of such proposal by the
Board of Directors of ICP;
"Take-over Proposal" means, in respect of ICP or its subsidiaries or their
assets, any proposals or offers regarding any take-over bid, merger,
consolidation, amalgamation, arrangement, sale of a material amount of assets,
sale of treasury shares (other than pursuant to options under the Stock Option
Plans) or other business combination or similar transaction; and
"Take-up Date" means the date that UTCSub first takes up and acquires ICP Shares
pursuant to the Offer.
1.2 Singular, Plural, etc.
Words importing the singular number include the plural and vice versa and words
importing gender include the masculine, feminine and neuter genders.
1.3 Deemed Currency
In the absence of a specific designation of any currency any undescribed dollar
amount herein shall be deemed to refer to United States dollars.
1.4 Headings, etc.
The division of this Agreement into Articles and Sections, the provision of a
table of contents hereto and the insertion of the recitals and headings are for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement and, unless otherwise stated, all references in
this Agreement to Articles and Sections refer to Articles and Sections of this
Agreement in which such reference is made.
1.5 Date for any Action
In the event that any date on which any action is required to be taken hereunder
by any of the parties hereunder is not a Business Day, such action shall be
required to be taken on the next succeeding day which is a Business Day.
1.6 Governing Law
This Agreement shall be governed by and interpreted in accordance with the laws
of the Province of Ontario and the laws of Canada applicable therein.
1.7 Attornment
The parties hereby irrevocably and unconditionally consent to and submit to the
courts of the Province of Ontario for any actions, suits or proceedings arising
out of or relating to this Agreement or the matters contemplated hereby (and
agree not to commence any action, suit or proceeding relating thereto except in
such courts) and further agree that service of any process, summons, notice or
document by single registered mail to the addresses of the parties set forth in
this Agreement shall be effective service of process for any action, suit or
proceeding brought
7
<PAGE>
against either party in such court. The parties hereby irrevocably and
unconditionally waive any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the matters contemplated hereby
in the courts of the Province of Ontario and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such action, suit or proceeding so brought has been brought in an inconvenient
forum.
ARTICLE 2
THE OFFER
2.1 The Offer
(a) Provided that this Agreement shall not have been terminated in accordance
with Article 11, then UTCSub shall, as promptly as practicable, (but in no
event later than five Business Days after the date of the public
announcement of the execution of this Agreement), and UTC shall cause
UTCSub to, commence (within the meaning of Rule 14d-2 under the Exchange
Act) an offer to purchase all of the outstanding ICP Shares for a price of
$11.75 in cash for each ICP Share, which offer shall be made in accordance
with applicable Securities Laws and be subject only to the Offer Conditions
(the "Offer", which definition shall include any permitted amendments to,
or extensions of, the Offer). The Offer shall be made pursuant to the
Offer Documents and shall contain the terms and conditions set forth in
this Agreement. The obligation of UTCSub to, and of UTC to cause UTCSub
to, commence the Offer, conduct and consummate the Offer and accept for
payment, and pay for, any ICP Shares tendered (and not properly withdrawn)
pursuant to the Offer shall be subject only to the Offer Conditions (any of
which may be waived in whole or in part by UTCSub in its sole discretion).
UTCSub expressly reserves the right, subject to compliance with applicable
Securities Laws, to modify the terms of the Offer, except that, without the
express written consent of ICP, UTCSub shall not (i) reduce the number of
ICP Shares subject to the Offer, (ii) reduce the Offer price, (iii) add to
or modify the Offer Conditions, (iv) except as provided in the next
sentence, change the Expiry Time, (v) change the form of consideration
payable in the Offer or (vi) amend, alter, add or waive any term of the
Offer in any manner that is, in the opinion of ICP, acting reasonably,
materially adverse to the holders of the ICP Shares. Notwithstanding the
foregoing, (A) if on any scheduled expiration date of the Offer, which
shall initially be the Initial Expiry Time, all of the Offer Conditions
have not been satisfied or waived, UTCSub shall, and UTC shall cause UTCSub
to, unless in the reasonable judgment of UTC all of the Offer Conditions
cannot be satisfied or waived on or prior to December 15, 1999, from time
to time, extend the Expiry Time for such period of time as is necessary to
satisfy or fulfill such conditions, (B) UTCSub may extend the Offer for any
period required by any rule, regulation, interpretation or position of any
of the Securities Authorities applicable to the Offer, or to permit ICP to
cure any misrepresentation, breach or non-performance during the time
period referred to in the proviso to clause (d) of the Offer Conditions,
and (C) UTCSub may extend the Offer for up to ten (10) Business Days (but
not beyond December 15, 1999) if there have been validly tendered (and not
properly withdrawn) prior to the expiration of the Offer such number of
8
<PAGE>
ICP Shares that would constitute at least 80%, but less than 90%, of the
issued and outstanding ICP Shares as of the date of determination. Subject
only to the Offer Conditions, UTCSub shall, and UTC shall cause UTCSub to,
pay, as soon as practicable after the expiration of the Offer, for all ICP
Shares validly tendered (and not properly withdrawn).
(b) UTCSub will instruct the depositary under the Offer to advise ICP, from
time to time (but not less frequently than every two (2) Business Days
until the day immediately prior to the Expiry Time and thereafter on an
hourly basis, if requested by ICP and in such manner as ICP may reasonably
request), as to the number of ICP Shares that have been tendered (and not
properly withdrawn) under the Offer.
(c) The parties hereto agree that UTC may make the Offer through UTCSub but
that UTC shall be liable to ICP for the full performance by UTCSub of its
obligations under this Agreement.
2.2 ICP Directors' Circular
(a) ICP hereby consents to the Offer as set forth in Section 2.1 and
represents, warrants and confirms that (i) its Board of Directors has
unanimously (A) determined that the Offer is fair to the holders of ICP
Shares and is in the best interests of ICP and such holders and (B)
approved the Offer and this Agreement and resolved to recommend acceptance
of the Offer by the holders of ICP Shares, provided that the Offer is not
amended except in accordance with the terms of this Agreement, and (C)
determined to elect, to the extent permitted by law, not to be subject to
any "moratorium", "control share acquisition", "business combination",
"fair price" or other form of anti-takeover laws and regulations of any
jurisdiction that may purport to be applicable to this Agreement or the
Lockup Agreements, (ii) the making of the Offer and the taking of any other
action by UTC or UTCSub in connection with this Agreement or the Lockup
Agreements and the transactions contemplated hereby and thereby have been
consented to by the Board of Directors of ICP in accordance with the terms
and provisions of the Confidentiality Agreement dated March 19, 1999
between UTC and ICP (the "Confidentiality Agreement") and (iii) Credit
Suisse First Boston Corporation, ICP's independent financial advisor, has
advised ICP's Board of Directors that, in its opinion, the consideration to
be paid in the Offer to ICP's shareholders is fair, from a financial point
of view, to such shareholders. On the date the Offer Documents are filed
with the appropriate Securities Authorities, ICP shall file with the
Securities Authorities a directors' circular with respect to the Offer
containing the recommendation described in Section 2.2(a) and shall mail
the directors' circular to the shareholders of ICP. The directors'
circular shall comply as to form and content in all material respects with
the requirements of applicable Securities Laws and, on the date filed with
Securities Authorities and on the date first published, sent or given to
ICP's shareholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
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<PAGE>
circumstances under which they were made, not misleading, except that no
representation or warranty is made by ICP with respect to written
information supplied by UTC or UTCSub or any other third party specifically
for inclusion in the directors' circular. ICP, UTC and UTCSub each agree
promptly to correct any written information provided by it for use in the
directors' circular if and to the extent that such information shall have
become false or misleading in any material respect, and ICP further agrees
to take all steps necessary to amend or supplement the directors' circular
and to cause the directors' circular as so amended or supplemented to be
filed with the appropriate Securities Authorities and disseminated to ICP's
shareholders, in each case as and to the extent required by applicable
Securities Laws. UTC shall be given reasonable opportunity to review and
comment upon the directors' circular prior to its filing with the
Securities Authorities or dissemination to ICP's shareholders, and ICP
shall consider such comments in good faith. ICP agrees to provide UTC any
comments ICP or its counsel may receive from the Securities Authorities
with respect to the directors' circular promptly after the receipt of such
comments.
(b) The Board of Directors of ICP has been advised that all directors of ICP
intend to tender their ICP Shares under the Offer. The directors' circular
shall reflect the intention of such directors to tender their ICP Shares
pursuant to the Offer.
(c) Notwithstanding Section 2.2(a), in the event that, prior to the expiry of
the Offer, a Superior Take-over Proposal is offered or made to the holders
of ICP Shares or ICP, the Board of Directors of ICP may withdraw, modify or
change any recommendation regarding the Offer if the Board of Directors of
ICP, acting in good faith, after consulting outside counsel, determines
that the directors are required to do so in order to discharge properly
their fiduciary duties under applicable law.
2.3 Offer Documents
(a) On the date of commencement of the Offer, UTC and UTCSub shall file or
cause to be filed with the appropriate Securities Authorities an offer to
purchase and take-over circular and the related letter of transmittal,
notice of guaranteed delivery and summary advertisement pursuant to which
the Offer will be made (collectively, the "Offer Documents"). UTC and
UTCSub further agree to take all reasonable steps necessary to cause the
Offer Documents to be disseminated to holders of ICP Shares in accordance
with applicable Securities Laws. UTC and UTCSub agree that the Offer
Documents shall comply as to form and content in all material respects with
applicable Securities Laws, and the Offer Documents, on the date first
published, sent or given to ICP's shareholders, shall not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation or warranty is made by UTC or
UTCSub with respect to written information supplied by ICP or any third
party specifically for inclusion or incorporation by reference in the Offer
Documents. UTC, UTCSub and ICP each
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agree promptly to correct any written information provided by it for use in
the Offer Documents if and to the extent that such information shall have
become false or misleading in any material respect and UTC and UTCSub
further agree to take all steps to cause the Offer Documents as so
corrected to be filed with the appropriate Securities Authorities and
disseminated to ICP's shareholders, in each case as and to the extent
required by applicable Securities Laws. ICP shall be given reasonable
opportunity to review and comment upon the Offer Documents prior to their
filing with Securities Authorities or dissemination to ICP's shareholders,
and UTC and UTCSub shall consider such comments in good faith. UTC and
UTCSub agree to provide ICP any comments UTC, UTCSub or their counsel may
receive from Securities Authorities with respect to the Offer Documents
promptly after the receipt of such comments.
(b) ICP agrees to provide such reasonable assistance as UTCSub or its agents
may reasonably request in connection with communicating the Offer and any
amendments and supplements thereto to the holders of the ICP Shares and to
such other persons as are entitled to receive the Offer under Securities
Laws, including providing lists of the shareholders of ICP and of the
holders of ICP Options and other securities convertible into or
exchangeable for ICP Shares and mailing labels with respect to all such
holders of securities as soon as possible after the date of this Agreement
but in any event no later than the close of business in Toronto on June 28,
1999 and updates or supplements thereto from time to time as may be
requested by UTCSub.
2.4 Outstanding Stock Options
ICP shall cause the vesting of option entitlements under the Stock Option Plans
to accelerate prior to or concurrent with the Expiry Time, such that all
outstanding ICP Options to acquire ICP Shares are exercisable prior to or
concurrent with the Expiry Time. At the Effective Time, each holder of a then
outstanding ICP Option shall, in settlement thereof, be entitled to receive from
ICP, and shall be paid in full satisfaction for each ICP Share subject to such
ICP Option an amount (subject to any applicable withholding tax) in cash equal
to the product of (i) the excess of the Offer price over the per share exercise
or purchase price of such ICP Option and (ii) the number of ICP Shares subject
to such ICP Option. Upon receipt of such consideration, each such ICP Option
shall be cancelled. The surrender of a ICP Option to ICP in exchange for such
consideration shall be deemed a release of any and all rights the holder had or
may have had in respect of such ICP Option. The Stock Option Plans shall
terminate as of the Effective Time and any and all rights under any and all
rights under any provisions in any other plan, program or arrangement providing
for the issuance or grant of any other interest in respect of the capital stock
of ICP or any subsidiary thereof shall be cancelled by ICP as of the Effective
Time.
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ARTICLE 3
PUBLICITY AND SOLICITATION
3.1 Publicity
UTC, UTCSub and ICP shall not issue any press release with respect to this
Agreement or the transactions contemplated hereby unless such action is agreed
to jointly or is required by applicable law or by obligations pursuant to any
listing agreement with a stock exchange, in which case the party making such
release will use reasonable efforts to consult the other party before issuance
of such release.
3.2 Solicitation
The financial advisors to UTC and UTCSub will act as dealer managers (the
"Dealer Managers") in connection with the solicitation of acceptances of the
Offer and will form a soliciting dealer group comprised of members of stock
exchanges in Canada and the United States therefor.
ARTICLE 4
TRANSACTIONS FOLLOWING COMPLETION OF THE OFFER
4.1 Second Stage Transaction
If UTCSub takes up and pays for any ICP Shares pursuant to the terms of the
Offer, UTCSub shall use its reasonable best efforts to, subject to any necessary
regulatory and shareholder approval, acquire, and ICP agrees to assist UTCSub in
acquiring, the balance of any non-tendered ICP Shares as soon as practicable
(but in any event no later than ninety (90) days) following the Take-up Date by
way of a statutory arrangement, amalgamation, merger, reorganization,
consolidation, recapitalization or other type of acquisition transaction or
transactions ("Second Stage Transaction") carried out for a cash consideration
per ICP Share not less than the consideration paid pursuant to the Offer.
Nothing herein shall be construed to prevent UTCSub from acquiring, directly or
indirectly, additional ICP Shares in the open market or in privately negotiated
transactions, in accordance with Securities Laws (including by way of compulsory
acquisition) following completion of the Offer.
4.2 Information Circular, Etc.
Without limiting Section 4.1, ICP agrees that if UTCSub is required to use its
reasonable best efforts to effect a Second Stage Transaction which requires
approval of ICP's shareholders in a meeting of ICP's shareholders, ICP shall
take all action necessary in accordance with the Securities Laws, other
applicable Canadian laws, the ICP Governing Documents and the requirements of
The Toronto Stock Exchange and the American Stock Exchange or any other
regulatory authority having jurisdiction to duly call, give notice of, convene
and hold a meeting of its shareholders as promptly as practicable to consider
and vote upon the action proposed by UTCSub. In the event of such a meeting or
meetings, ICP shall mail to its shareholders an Information Circular with
respect to the meeting of ICP's shareholders. The term "Information Circular"
shall mean such proxy or other required informational statement or circular, as
the case may be, and all related materials at the time required to be mailed to
ICP's shareholders and all amendments or supplements thereto, if any. Each of
UTCSub and ICP shall obtain and furnish
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the information required to be included in any Information Circular. The
information provided and to be provided by UTCSub and ICP for use in the
Information Circular, on both the date the Information Circular is first mailed
to ICP's shareholders and on the date any such meeting is held, shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading and will
comply in all material respects with all applicable requirements of law. UTCSub
and ICP each agree to correct promptly any such information provided by it for
use in any Information Circular which shall have become false or misleading.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF UTC AND UTCSUB
As of the date hereof, UTC and UTCSub hereby jointly and severally represent and
warrant to ICP as follows and acknowledge that ICP is relying upon these
representations and warranties in connection with the entering into of this
Agreement:
5.1 Organization and Qualification
UTC is a corporation duly incorporated and organized and validly existing under
the laws of the State of Delaware and has the requisite corporate power and
authority to carry on its business as it is now being conducted. UTCSub is a
corporation duly incorporated and organized and validly existing under the laws
of the Province of New Brunswick and has the requisite corporate power and
authority to carry on its business as it is now being conducted.
5.2 Authority Relative to this Agreement
UTC and UTCSub have the requisite corporate authority to enter into this
Agreement and to carry out their obligations hereunder. The execution and
delivery of this Agreement and the consummation by UTC and UTCSub of the
transactions contemplated hereby have been duly authorized by their respective
Boards of Directors and no other corporate proceedings on their part are or will
be necessary to authorize this Agreement and the transactions contemplated
hereby. This Agreement has been duly executed and delivered by each of UTC and
UTCSub and constitutes the legal, valid and binding obligation of each of UTC
and UTCSub enforceable against each of them in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws relating to or affecting creditors' rights generally
and to general principles of equity.
5.3 No Violations
(a) Neither the execution and delivery of this Agreement by UTC and UTCSub, the
consummation by them of the transactions contemplated hereby nor compliance
by them with any of the provisions hereof will: (i) violate, conflict with,
or result in breach of any provision of, require any consent, approval or
notice under, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) or result in a right of
termination or acceleration under, or result in a creation of any lien,
security interest, charge or encumbrance upon any of the properties or
assets of UTC or UTCSub or any of their subsidiaries under,
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any of the terms, conditions or provisions of (x) the charter or bylaws of
either UTC or UTCSub or (y) any material note, bond, mortgage, indenture,
loan agreement, deed of trust, agreement, lien, contract or other
instrument or obligation to which UTC or UTCSub or any of their
subsidiaries is a party or to which any of them, or any of their respective
properties or assets, may be subject or by which either UTC or UTCSub or
any of their subsidiaries is bound; or (ii) subject to compliance with the
statutes and regulations referred to in Section 5.3(b), violate any
judgment, ruling, order, writ, injunction, determination, award, decree,
statute, ordinance, rule or regulation applicable to UTC or UTCSub or any
of their subsidiaries (except, in the case of each of clauses (i) and (ii)
above, for such violations, conflicts, breaches, defaults or terminations
which, or any consents, approvals or notices which if not given or
received, would not have any material adverse effect on the ability of UTC
to consummate the transactions contemplated hereby on a timely basis).
(b) Other than in connection with or in compliance with the provisions of
Securities Laws, the Competition Act, the HSR Act, the Investment Canada
Act, the rules of The Toronto Stock Exchange or the American Stock
Exchange, and any other pre-merger notification or similar statutes, (i)
there is no legal impediment to UTC and UTCSub's consummation of the
transactions contemplated by this Agreement and (ii) no filing or
registration with, or authorization, consent or approval of, any domestic
or foreign public body or authority is necessary by UTC or UTCSub in
connection with the making or the consummation of the Offer, except for
such filings or registrations which, if not made, or for such
authorizations, consents or approvals, which, if not received, would not
have a material adverse effect on the ability of UTCSub to consummate the
transactions contemplated hereby on a timely basis.
5.4 Funds Available
Adequate arrangements have been made for aggregate funds to be available at each
of the Expiry Time and the Effective Time, such that UTCSub will be in a
position (i) to pay for all ICP Shares tendered pursuant to the Offer in
accordance with the terms of the Offer and any ICP Shares acquired pursuant to a
compulsory acquisition or Second Stage Transaction and (ii) to satisfy all other
financial obligations of UTC, UTCSub and ICP arising as a result of the
consummation of the transactions contemplated hereby.
5.5 Litigation
There is no litigation, suit, claim, action, proceeding or investigation pending
or, to the knowledge of UTC and UTCSub, threatened against UTC or UTCSub or any
of their respective properties or assets by or before any Governmental
Authority, which would seek to delay or prevent the consummation of any
transaction contemplated by this Agreement. Neither UTC, UTCSub nor any
property or asset of UTC or UTCSub is subject to any continuing order of,
consent decree, settlement agreement or similar written agreement with, or, to
the knowledge of UTC and UTCSub, continuing investigation by, any Governmental
Authority, or any order, writ, judgment, injunction, decree, determination or
award of any Governmental Authority or any
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arbitrator which would prevent UTC or UTCSub from performing their respective
material obligations under this Agreement or prevent or materially delay the
consummation of any transaction contemplated by this Agreement.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF ICP
As of the date hereof and except as otherwise disclosed in ICP's SEC Reports or
the Disclosure Schedule, ICP hereby represents and warrants to UTC and UTCSub as
follows and acknowledges that they are relying upon these representations and
warranties in connection with the entering into of this Agreement:
6.1 Organization and Qualification
ICP is a corporation duly continued and validly existing under the federal laws
of Canada and has the requisite corporate power and authority to carry on its
business as it is now being conducted. Each of ICP's subsidiaries is a
corporation duly incorporated and organized and validly subsisting under the
laws of the jurisdiction of its incorporation and has the requisite corporate
power and authority to carry on its business as now being conducted. ICP and
each of its subsidiaries is duly registered to do business and is in good
standing in each jurisdiction in which the character of its properties, owned or
leased, or the nature of its activities make such registration necessary, except
where the failure to be so registered or in good standing neither, individually
or in the aggregate, has had or would be reasonably expected to have a Material
Adverse Effect nor would prevent or materially delay or limit the performance of
this Agreement by ICP.
6.2 Authority Relative to this Agreement
ICP has the requisite corporate authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by ICP's Board of Directors, and no other corporate proceedings
on the part of ICP are necessary to authorize this Agreement and the
transactions contemplated hereby (except for obtaining shareholder approval in
respect of any Second Stage Transaction). This Agreement has been duly executed
and delivered by ICP and constitutes the legal, valid and binding obligation of
ICP enforceable against ICP in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and other laws
relating to or affecting creditors' rights generally and to general principles
of equity.
6.3 No Violations
(a) Neither the execution and delivery of this Agreement by ICP, the
consummation of the transactions contemplated hereby nor compliance by ICP
with any of the provisions hereof will: (i) violate, conflict with, or
result in breach of any provision of, require any consent, approval or
notice under, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) or result in a right of
termination or acceleration under, cause any available credit to cease to
be available under, or result in a creation of any lien,
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security interest, charge or encumbrance upon any of the properties or
assets of ICP or any of its subsidiaries, or impair or limit the ability of
ICP or any subsidiary to carry on business under, any of the terms,
conditions or provisions of (x) the ICP Governing Documents or (y) any
note, bond, mortgage, indenture, loan agreement, deed of trust, agreement,
lien, contract or other instrument or obligation to which ICP or any of its
subsidiaries is a party or to which any of them, or any of their respective
properties or assets, may be subject or by which ICP or any of its
subsidiaries is bound; or (ii) subject to compliance with the statutes and
regulations referred to in Section 6.3(b), violate any judgment, ruling,
order, writ, injunction, determination, award, decree, statute, ordinance,
rule or regulation applicable to ICP or any of its subsidiaries (except, in
the case of each of clauses (i) and (ii) above, for such violations,
conflicts, breaches, defaults, terminations which, or any consents,
approvals or notices which if not given or received, neither, individually
or in the aggregate, have had or would be reasonably expected to have a
Material Adverse Effect nor would prevent or materially delay or limit the
performance of this Agreement by ICP or the consummation of any of the
transactions contemplated by this Agreement).
(b) Other than in connection with or in compliance with the provisions of
Securities Laws, the Competition Act, the HSR Act, the Investment Canada
Act, the rules of The Toronto Stock Exchange or the American Stock
Exchange, and any other pre-merger notification or similar statutes, (i)
there is no legal impediment to ICP's consummation of the transactions
contemplated by this Agreement and (ii) no filing or registration with, or
authorization, consent or approval of, any domestic or foreign public body
or authority is necessary by ICP in connection with the making or the
consummation of the Offer, except for such filings or registrations which,
if not made, or for such authorizations, consents or approvals, which, if
not received, would not prevent or materially delay or limit the
performance of this Agreement by ICP or the consummation of any of the
transactions contemplated by this Agreement.
6.4 Capitalization
As of the date hereof, the authorized share capital of ICP consists of an
unlimited number of ordinary shares and class A and B preference shares. As of
the date of ICP's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1999, forty million seven hundred forty-seven thousand four hundred
and seventy-one (40,747,471) ICP Shares were issued and outstanding and no Class
A or Class B preference shares were issued and outstanding. As of the date
hereof, 2,043,000 ICP Shares are reserved for issuance pursuant to the exercise
of outstanding ICP Options granted under the Stock Option Plans. Except for
such ICP Options, there are no options, warrants or other rights, agreements or
commitments of any character whatsoever requiring the issuance, sale or transfer
by ICP of any shares of ICP (including the ICP Shares) or any subsidiary of ICP
or any securities convertible into, or exchangeable or exercisable for, or
otherwise evidencing a right to acquire, any shares of ICP (including the ICP
Shares) or any subsidiary of ICP, nor are there any outstanding stock
appreciation rights, phantom equity or similar rights, agreements, arrangements
or commitments based upon the book value, income or other attribute of ICP or
any subsidiary of ICP. All outstanding ICP
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Shares have been duly authorized and validly issued, are fully paid and non-
assessable and are not subject to, nor were they issued in violation of, any
preemptive rights, and all ICP Shares issuable upon exercise of outstanding
stock options in accordance with their respective terms will be duly authorized
and validly issued, fully paid and non-assessable and will not be subject to any
preemptive rights.
6.5 No Material Adverse Effect
Since March 31, 1999, there has not been any change, condition, event or
development that has had or is reasonably likely to have a Material Adverse
Effect.
6.6 No Undisclosed Material Liabilities
Except (a) as disclosed or reflected in the consolidated interim unaudited
financial statements of ICP as at March 31, 1999 included in ICP's Quarterly
Report on Form 10-Q for such period, (b) for liabilities and obligations (i)
incurred after March 31, 1999 in the ordinary course of business and consistent
with past practice, or (ii) pursuant to the terms of this Agreement, and (c) for
liabilities or obligations which neither, individually or in the aggregate, have
had or would reasonably be expected to have a Material Adverse Effect nor would
prevent or materially delay or limit the performance of this Agreement by ICP,
neither ICP nor any of its subsidiaries has incurred any liabilities of any
nature, whether accrued, contingent or otherwise (or which would be required by
generally accepted accounting principles in Canada to be reflected on a
consolidated balance sheet of ICP and its subsidiaries).
6.7 Brokerage Fees
ICP has not retained (nor will it retain) any financial advisor, broker, agent
or finder or paid or agreed to pay any financial advisor, broker, agent or
finder on account of this Agreement, any transaction contemplated hereby or any
transaction presently ongoing or contemplated, except that Credit Suisse First
Boston Corporation has been retained as ICP's financial advisor in connection
with certain matters including the transactions contemplated hereby. ICP has
delivered to UTCSub a true and complete copy of its agreement with Credit Suisse
First Boston Corporation.
6.8 Conduct of Business
Since March 31, 1999, neither ICP nor any of its subsidiaries has taken any
action that would be in violation of Section 7.1 if such provision had been in
effect since such date, other than violations which neither, individually or in
the aggregate, have had or would be reasonably expected to have a Material
Adverse Effect nor would prevent or materially delay or limit the performance of
this Agreement by ICP.
6.9 Reports
(a) ICP has heretofore made available to UTCSub true and complete copies of (i)
ICP's Annual Report on Form 10-K or 20-F, as the case may be, for each of
the fiscal years ended December 31, 1996, 1997, 1998, Information Circular
relating to ICP's 1999 annual meeting of shareholders and related 1998
Annual
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Report to shareholders and (ii) all prospectuses or other offering
documents used by ICP in the offering of its securities or filed with
Securities Authorities since January 1, 1998, and (iii) ICP's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 1999. As of
their respective dates, such forms, statements, prospectuses and other
offering documents (including all exhibits and schedules thereto and
documents incorporated by reference therein) did not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading and complied
in all material respects with all applicable requirements of law and
related rules and regulations. The audited financial statements and
unaudited interim financial statements of ICP and its consolidated
subsidiaries publicly issued by ICP, or included or incorporated by
reference in such forms, statements, prospectuses and other offering
documents were prepared in accordance with generally accepted accounting
principles in Canada applied on a consistent basis (except (i) as otherwise
indicated in such financial statements and the notes thereto or, in the
case of audited statements, in the related report of ICP's independent
accountants or (ii) in the case of unaudited interim financial statements,
to the extent they may not include footnotes or may be condensed or summary
statements; provided, however, that were such unaudited interim financial
statements to include footnotes or not be condensed, the financial results
indicated therein would not be materially different), and fairly present
the consolidated financial position, results of operations and changes in
financial position of ICP and its consolidated subsidiaries as of the dates
thereof and for the periods indicated therein (subject, in the case of any
unaudited interim financial statements, to normal year-end audit
adjustments except for such adjustments necessary for a fair statement of
the results for the interim periods presented).
(b) ICP will deliver to UTCSub as soon as they become available true and
complete copies of any report or statement filed by it with Securities
Authorities subsequent to the date hereof. As of their respective dates,
such reports and statements (excluding any information therein provided by
UTCSub specifically for inclusion therein, as to which ICP makes no
representation) will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
are made, not misleading and will comply in all material respects with all
applicable requirements of law and related rules and regulations. The
consolidated financial statements of ICP issued thereby or to be included
in such reports and statements (excluding any information therein provided
by UTCSub specifically for inclusion therein, as to which ICP makes no
representation) will be prepared in accordance with generally accepted
accounting principles in Canada applied on a consistent basis (except (i)
as otherwise indicated in such financial statements and the notes thereto
or, in the case of audited statements, in the related report of ICP's
independent accounts or (ii) in the case of unaudited interim financial
statements, to the extent they may not include footnotes or may be
condensed or summary statements; provided, however, that were such
unaudited interim financial statements to include
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footnotes or not be condensed, the financial results indicated therein
would not be materially different) and will present fairly the consolidated
financial position, results of operations and changes in financial position
of ICP as of the dates thereof and for the periods indicated therein
(subject, in the case of any unaudited interim financial statements, to
normal year-end audit adjustments except for such adjustments necessary for
a fair statement of the results for the interim periods presented).
6.10 U.S. Registration
The ICP Shares were not issued by a closed-end investment company registered
under the United States Investment Company Act of 1940.
6.11 Subsidiaries
All of the capital stock of each of ICP's subsidiaries is beneficially owned,
directly or indirectly, by ICP with valid and marketable title thereto, free and
clear of any and all liens, charges, security interests, adverse claims,
encumbrances and demands of any nature or kind whatsoever.
6.12 Litigation
There is no claim, action, suit, proceeding or governmental investigation
pending or, to the knowledge of ICP, threatened against or relating to ICP or
any of its subsidiaries that involves a claim against ICP or any of its
subsidiaries in excess of $500,000 or that, either individually or in the
aggregate, has had or would reasonably be expected to have a Material Adverse
Effect or in any manner challenges or seeks to prevent, enjoin, alter or
materially delay or limit the Offer or the performance of this Agreement by ICP
or any of the other transactions contemplated hereby. Neither ICP (or any of
its subsidiaries) nor any property or asset of ICP (or any of its subsidiaries)
is subject to any continuing order of, consent, decree, settlement, agreement or
similar written agreement with or, to the knowledge of ICP, continuing
investigation by, any Governmental Authority, or any order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority or any
arbitrator which would prevent ICP from performing its material obligations
under this Agreement or prevent or materially delay or limit the consummation of
any transaction contemplated by this Agreement.
6.13 Insurance
ICP has insurance policies, including without limitation, policies of life,
fire, health and other casualty and liability insurance, that ICP believes is
sufficient for its business and operations.
6.14 Environmental
(a) ICP has been and is in compliance with all applicable environmental laws
and regulations except for non-compliance that neither, individually or in
the aggregate, has had or would reasonably be expected to have a Material
Adverse Effect nor would prevent or materially delay or limit the
performance of this Agreement by ICP;
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(b) ICP has never received any notice of or been prosecuted for non-compliance
with any environmental laws or regulations, nor has ICP settled any
allegation of non-compliance short of prosecution; and
(c) there are no actual or threatened orders or directions relating to
environmental matters requiring any material work, repair or construction
or capital expenditures to be made with respect to any of ICP's properties,
nor has ICP received notice of any of the same.
6.15 Benefit Plans
(a) there are no benefit plans (as defined in Section 9.6);
(b) the benefit plans have been maintained and operated in accordance with
their terms and applicable legal requirements and there are no outstanding
violations or defaults under any benefit plans except for violations or
defaults that neither, individually or in the aggregate, have had or would
be reasonably expected to have a Material Adverse Effect nor would prevent
or materially delay or limit the performance of this Agreement by ICP, nor
any actions, claims or other proceedings pending or, to the knowledge of
ICP, threatened with respect to any benefit plan except for claims for
benefits in the ordinary course of business;
(c) no benefit plan currently is under a governmental investigation or audit
and, to the knowledge of ICP, no such investigation or audit is
contemplated or under consideration;
(d) each benefit plan covers only current or former employees of ICP or its
subsidiaries and their dependents or beneficiaries;
(e) no promise or commitment to increase benefits under any benefit plan
(except pursuant to the express terms of the plan) or to adopt any
additional benefit plan has been made;
(f) no event has occurred which could subject any person to any tax, penalty or
fiduciary liability in connection with any plan that, individually or in
the aggregate, has had or would be reasonably expected to have a Material
Adverse Effect or would prevent or materially delay or limit the
performance of this Agreement by ICP;
(g) there have been no withdrawals of surplus or contribution holidays in
respect of such benefit plans, except as permitted by law and the terms of
the benefit plans;
(h) ICP and its subsidiaries do not contribute to any multi-employer plan or
multiple employer plans with respect to which there would be a liability of
ICP or its subsidiaries on withdrawal from any such plan except for
liability that neither, individually or in the aggregate, has had or would
reasonably be expected to have a Material Adverse Effect or would prevent
or materially delay or limit the performance of this Agreement by ICP;
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(i) ICP and its subsidiaries do not provide for any medical or health benefits
extending beyond termination of employment, except to the extent required
by applicable law;
(j) neither ICP nor any of its subsidiaries is a party to any collective
bargaining agreement or other agreement or understanding with a labour
union or labour organization; there are no labour unions or other
organizations representing, purporting to represent or attempting to
represent, any employee of ICP or any of its subsidiaries; and
(k) the consummation of the transactions contemplated by this Agreement (alone
or together with any other event) will not (i) entitle any person to any
benefit under any benefit plan, (ii) accelerate the time of payment,
vesting or funding of, or increase the amount, of any compensation or
benefits due to any executive officer under any benefit plan, or (iii)
accelerate the timing of payment, vesting or funding of, or increase the
amount, of any compensation or benefits due any person other than an
executive officer under any benefit plan except for amounts that neither,
individually or in the aggregate, have had or would be reasonably expected
to have a Material Adverse Effect nor would prevent or materially delay or
limit the performance of this Agreement by ICP.
6.16 Tax Matters
(a) ICP and its subsidiaries have timely filed all returns and reports relating
to taxes of any kind or nature (including but not limited to income, sales,
payroll, value added, property, withholding and estimated taxes) required
to be filed by applicable law with respect to each of ICP and its
subsidiaries or any of their income, properties or operations as of the
date hereof, except where the failure to file neither, individually or in
the aggregate, has had or would be reasonably expected to have a Material
Adverse Effect nor would prevent or materially delay or limit the
performance of this Agreement by ICP. All such returns are true, accurate
and complete and accurately set forth all items required to be reflected or
included in such terms by applicable federal, state, local or foreign tax
laws, rules or regulations, except to the extent that any inaccuracies in
filed returns would neither, individually or in the aggregate, have had or
would be reasonably expected to have a Material Adverse Effect nor would
prevent or materially delay or limit the performance of this Agreement by
ICP. ICP and its subsidiaries have timely paid all such taxes attributable
to each of ICP and its subsidiaries that were due and payable without
regarding to whether such taxes have been assessed, except to the extent
that any failure to pay neither, individually or in the aggregate, has had
or would be reasonably expected to have a Material Adverse Effect nor would
prevent or materially delay or limit the performance of this Agreement by
ICP. ICP has made available to UTC complete and accurate copies of the
portions applicable to each of ICP and its subsidiaries of all income and
franchise tax returns, and any amendments thereto, filed by or on behalf of
ICP or any of its subsidiaries or any member of a group of corporations
including ICP or any of its subsidiaries for the taxable years ending 1994
and 1995 (in respect of
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Canadian returns) and 1994 through 1997, inclusive (in respect of United
States returns).
(b) There are no pending or, to ICP's knowledge, threatened audits,
examinations, investigations, deficiencies, claims or other proceedings
relating to such taxes of ICP or any of its subsidiaries. ICP and its
subsidiaries have made adequate provisions in accordance with Canadian
generally accepted accounting principles appropriately and consistently
applied to each of ICP and its subsidiaries in the consolidated financial
statements included in the Reports referred to in Section 6.9(a) for the
payment of all taxes for which each of ICP and its subsidiaries may be
liable for the periods covered thereby that were not yet due and payable as
of the dates thereof, regardless of whether the liability for such taxes is
disputed, except where the failure to reserve neither, individually or in
the aggregate, has had or would be reasonably expected to have a Material
Adverse Effect nor would prevent or materially delay or limit the
performance of this Agreement by ICP.
6.17 Year 2000
ICP has taken steps that are reasonable to ensure that the occurrence of the
year 2000 will not materially and adversely affect the information and business
systems of ICP or its subsidiaries, and it is ICP's reasonable expectation that
no material expenditures in excess of currently budgeted items will be required
in order to cause such systems to operate properly following the change of the
year 1999 to 2000.
6.18 Compliance
Neither ICP nor any of its subsidiaries is or has been in conflict with, in
default with respect to or in violation of, any statute, law, ordinance, rule,
regulation, order, judgment, decree, agreement, indenture, contract or other
instrument applicable to ICP or any of its subsidiaries or by which any property
or asset of ICP or any of its subsidiaries is bound or affected, except for any
such conflicts, defaults or violations that neither, individually or in the
aggregate, have had or would be reasonably expected to have a Material Adverse
Effect nor would prevent or materially delay or limit the performance of this
Agreement by ICP. ICP and its subsidiaries have all material permits, licenses,
authorizations, consents, approvals and franchises from Governmental Authorities
required to conduct their businesses as currently conducted, except for such
permits, licenses, authorizations, consents, approvals and franchises the
absence of which neither, individually or in the aggregate, have had or would be
reasonably expected to have a Material Adverse Effect nor would prevent or
materially delay or limit the performance of this Agreement by ICP.
6.19 Debt Covenant
At the date hereof ICP is able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.03 of the
Indenture dated as of May 13, 1998 among International Comfort Products
Holdings, Inc., International Comfort Products Corporation and United States
Trust Company of New York (the "Indenture"; the terms
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"Indebtedness" and "Permitted Indebtedness" as used in this sentence have the
meanings ascribed to such terms by the Indenture).
ARTICLE 7
CONDUCT OF BUSINESS
7.1 Conduct of Business by ICP
Unless UTCSub shall otherwise agree in writing or as alternatively expressly
permitted or specifically contemplated by this Agreement, ICP covenants and
agrees that, during the period from the date of this Agreement until this
Agreement is terminated:
(a) the business of ICP and its subsidiaries shall be conducted only in, and
ICP and its subsidiaries shall not take any action except in, the usual and
ordinary course of business and consistent with past practice, and ICP
shall use all commercially reasonable efforts to maintain and preserve its
and its subsidiaries' business organization, assets, employees and
advantageous business relationships;
(b) ICP shall not directly or indirectly do or permit to occur any of the
following: (i) amend the ICP Governing Documents; (ii) declare, set aside
or pay any dividend or other distribution or payment (whether in cash,
shares or property) in respect of its share capital; (iii) issue, grant,
sell or pledge or agree to issue, grant, sell or pledge any shares of ICP
or its subsidiaries, or securities convertible into or exchangeable or
exercisable for, or otherwise evidencing a right to acquire, shares of ICP
or its subsidiaries, other than ICP Shares issuable pursuant to the terms
of ICP Options outstanding on the date hereof; (iv) redeem, purchase or
otherwise acquire any of its outstanding shares or other securities; (v)
split, combine or reclassify any of its shares; (vi) adopt a plan of
liquidation or resolutions providing for the liquidation, dissolution,
merger, consolidation or reorganization of ICP or any of its subsidiaries;
or (vii) enter into or modify any contract, agreement, commitment or
arrangement with respect to any of the foregoing, except as permitted
above;
(c) other than pursuant to commitments entered into prior to the date of this
Agreement as disclosed in the Disclosure Schedule or ICP's SEC Reports,
neither ICP nor any of its subsidiaries shall directly or indirectly: (i)
sell, pledge, dispose of or encumber any assets except in the ordinary
course of business; (ii) acquire (by merger, amalgamation, consolidation or
acquisition of shares or assets) any corporation, partnership or other
business organization or division thereof, or, except for investments in
securities made in the ordinary course of business, make any investment
either by purchase of shares or securities, contributions of capital (other
than to subsidiaries), property transfer, or, except in the ordinary course
of business, purchase of any property or assets of any other individual or
entity; (iii) incur any indebtedness for borrowed money or any other
material liability or obligation or issue any debt securities or assume,
guarantee, endorse or otherwise as an accommodation become responsible for,
the obligations of any other individual or entity, or make any loans or
advances, except in the ordinary course
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of business; (iv) except for the Officer Obligations, pay, discharge or
satisfy any material claims, liabilities or obligations other than the
payment, discharge or satisfaction in the ordinary course of business
consistent with past practice of liabilities reflected or reserved against
in its financial statements or incurred in the ordinary course of business
consistent with past practice; (v) authorize, recommend or propose any
release or relinquishment of any material contract right other than in the
ordinary course of business consistent with past practice; (vi) waive,
release, grant or transfer any rights of material value or modify or change
in any material respect any existing material license, lease, contract,
production sharing agreement, government land concession or other document,
other than in the ordinary course of business consistent with past
practice; (vii) enter into any interest rate swaps, currency swaps or any
other rate fixing agreement for a financial transaction or enter into any
call arrangement of any sort or any forward sale agreement for commodities,
other than in the ordinary course of business consistent with past
practice; (viii) authorize or propose any of the foregoing, or enter into
or modify any contract, agreement, commitment or arrangement to do any of
the foregoing; or (ix) make any capital expenditures other than in
accordance with the 1999 capital expenditure budget previously disclosed in
writing to UTC;
(d) neither ICP nor any of its subsidiaries shall create any new Officer
Obligations and, except for payment of the existing Officer Obligations,
neither ICP nor any of its subsidiaries shall grant to any officer or
director an increase in compensation in any form, grant any general salary
increase other than in accordance with the requirements of any existing
collective bargaining or union contracts, grant to any other employee any
increase in compensation in any form other than routine increases in the
ordinary course of business consistent with past practices, make any loan
to any officer or director, or take any action with respect to the grant of
any severance or termination pay arising from the Offer or a change of
control of ICP or the entering into of any employment agreement with, any
senior officer or director, or with respect to any increase of benefits
payable under its current severance or termination pay policies;
(e) neither ICP nor any of its subsidiaries shall adopt or amend or make any
contribution to any bonus, profit sharing, option, pension, retirement,
deferred compensation, insurance, incentive compensation, other
compensation or other similar plan, agreement, trust, fund or arrangements
for the benefit of employees, except as is necessary to comply with the law
or as required by existing provisions of any such plans, programs,
arrangements or agreements; and
(f) ICP shall use its reasonable efforts to cause it current insurance (or re-
insurance) policies not be cancelled or terminated or any of the coverage
thereunder to lapse, unless simultaneously with such termination,
cancellation or lapse, replacement policies underwritten by insurance and
re-insurance companies of nationally recognized standing providing coverage
equal to or greater than the coverage under the cancelled, terminated or
lapsed policies for substantially similar premiums are in full force and
effect.
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ARTICLE 8
COVENANTS OF ICP
8.1 No Solicitation
(a) ICP shall immediately cease and cause to be terminated all existing
discussions and negotiations, if any, with any parties conducted before the
date of this Agreement with respect to any Take-over Proposal and, without
limitation, shall promptly following the execution of this Agreement
request the return of all confidential information provided by ICP to all
parties who have had such discussions or negotiations or who have entered
into confidentiality agreements with ICP pertaining to the sale of ICP or a
substantial portion of its assets.
(b) ICP shall immediately notify UTCSub of any Take-over Proposal received by
it or any of its subsidiaries or any of their respective directors,
officers, employees, agents, financial advisors, counsel or other
representatives or any request for confidential information relating to ICP
in connection with a Take-over Proposal or for access to the properties,
books or records of ICP or any of its subsidiaries by any person or entity
that it is considering making a Take-over Proposal. Any such notice to
UTCSub shall be made orally immediately following any such receipt or
request, shall be confirmed in writing, and shall indicate such details of
the Take-over Proposal or information request known to such persons as
UTCSub may reasonably request, including the identity of the person making
such Take-over Proposal or request for information.
(c) Neither ICP nor any of its subsidiaries, or any of their respective
directors, officers, employees, agents, financial advisors, counsel or
other representatives shall, directly or indirectly, (i) solicit, initiate
or encourage, or enter into any agreements or understandings with respect
to any Take-over Proposal (other than from UTC and its subsidiaries and
their respective directors, officers, employees, agents, financial
advisors, counsel or other representatives) or (ii) provide any
confidential information to any person or entity (other than UTC and its
affiliates) or participate in any discussions or negotiations relating to
any such Take-over Proposal.
(d) Notwithstanding Section 8.1(c), if the Board of Directors of ICP receives a
request for confidential information from a party who proposes to ICP a
Take-over Proposal and the Board of Directors of ICP determines that such
proposal is reasonably likely to lead to a Superior Take-over Proposal and,
after consulting with its outside counsel, that it is necessary to do so in
order for the directors to discharge properly their fiduciary duties under
applicable law, then, and only in such case, ICP may, subject to the prior
execution and delivery of a confidentiality agreement in substantially the
same form and containing the same restrictions and limitations as are set
forth in the Confidentiality Agreement, provide such party with access to
such information regarding ICP as was provided to or made available to UTC
and/or UTCSub, and ICP or its Board of Directors may consider and negotiate
such Superior Take-over Proposal (it being
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understood that neither ICP nor its Board of Directors may approve, make a
recommendation to ICP shareholders or enter into an agreement with respect
to such Superior Take-over Proposal unless this Agreement has been
previously terminated). In such event, upon UTC's request, ICP shall from
time to time advise UTC as to the status of such discussions and shall
provide to UTC a copy of any such confidentiality agreement immediately
upon its execution.
(e) ICP shall not waive, in whole or in part, the "standstill" provisions
applicable to any party to a confidentiality agreement with ICP (other than
UTC) as at the date hereof.
8.2 ICP Board of Directors
(a) Promptly upon the purchase by UTCSub of the outstanding ICP Shares pursuant
to the Offer, and from time to time thereafter, UTC shall be entitled to
designate up to such number of directors, rounded up to the next whole
number, on the Board of Directors of ICP as shall give UTC representation
on the Board of Directors of ICP equal to the product of the total number
of directors on the Board of Directors (giving effect to the directors
appointed pursuant to this sentence) multiplied by the percentage that the
aggregate number of the ICP Shares beneficially owned by UTC or any
affiliate of UTC following such purchase bears to the total number of ICP
Shares then outstanding, and ICP shall, at such time, immediately take all
actions necessary to cause UTC's designees to be appointed as directors of
ICP, including increasing the size of the Board of Directors of ICP or
securing the resignations of incumbent directors or both.
(b) ICP shall promptly take all actions required pursuant to Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder in order to fulfill
its obligations under this Section 8.2 and shall include in the Schedule
14D-9 such information with respect to ICP and its officers and directors
as is required under Section 14(f) and Rule 14f-1 to fulfill such
obligations. UTC shall supply to ICP and be solely responsible for any
information with respect to UTC and its nominees, officers, directors and
affiliates required by such Section 14(f) and Rule 14f-1.
(c) Following the appointment of designees of UTC pursuant to this Section 8.2
and prior to consummation of the Second Stage Transaction, any amendment of
this Agreement or the ICP Governing Documents, any termination of this
Agreement by ICP, any extension by ICP of the time for the performance of
any of the obligations or other acts of UTC hereunder or waiver thereof,
any waiver of any condition to the obligations of ICP or waiver of any of
ICP's rights hereunder or other action by ICP shall require the concurrence
of a majority of the directors of ICP then in office who were not
designated by UTC, which action shall be deemed to constitute the action of
the full Board of Directors of ICP even if such majority does not
constitute a majority of all directors then in office.
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ARTICLE 9
COVENANTS OF UTC and UTCSub
9.1 Regulatory and Other Authorizations: Consents
UTC and UTCSub agree to take any and all steps necessary to avoid or eliminate
each and every impediment under any antitrust, competition, or trade regulation
law that may be asserted by any Governmental Authority or any other party so as
to enable the parties to consummate the transactions contemplated hereby as soon
as practicable, but in any event no later than December 15, 1999, including
without limitation, committing to and/or effecting, by consent decree, hold
separate orders, or otherwise, the sale, divestiture or disposition of such
assets or businesses of UTC, UTCSub or ICP as are required to be divested in
order to avoid the entry of any injunction, temporary restraining order or other
Governmental Order, which would otherwise have the effect of preventing the
consummation of all or any part of the transactions contemplated hereby;
provided, however, that neither UTC nor UTCSub shall have any obligation under
this Section 9.1 to take any actions if such actions, in the reasonable judgment
of UTC, would reasonably be expected, in the aggregate, to materially impair the
overall benefits to be realized by UTC from consummation of the Offer and the
other transactions contemplated by this Agreement.
9.2 Employment Agreements
UTCSub agrees, and after the Effective Time will cause ICP and any successor to
ICP to agree, to honour and comply with the terms of those existing executive
termination and severance agreements, plans or policies of ICP and its
subsidiaries, in each case to the extent disclosed in the Disclosure Schedule or
ICP's SEC Reports or except as may otherwise be agreed with the relevant
employee.
9.3 Officers' and Directors' Insurance
UTCSub agrees to use reasonable efforts to secure directors and officers
liability insurance coverage for ICP's current and former directors and officers
on a six year "trailing" or "runoff' basis from and after the Effective Time.
If a "trailing" policy is not available, then UTCSub agrees that for the entire
period from the Effective Time until six years after the Effective Time, UTCSub
will use reasonable efforts to cause ICP or any successor to ICP to maintain
ICP's current directors' and officers' insurance policy or an equivalent policy,
subject in either case to terms and conditions no less advantageous to the
directors and officers of ICP than those contained in the policy in effect on
the date hereof, for all present and former directors and officers of ICP,
covering claims made prior to or within six years after the Effective Time.
This Section 9.3 shall not require UTCSub to pay an annual premium in excess of
200% of the aggregate annual amounts currently paid by ICP to maintain the
existing policies (the "Insurance Amount") and, if equivalent coverage cannot be
obtained, or can be obtained only by paying an annual premium in excess of such
amount, UTCSub shall use its reasonable best efforts to obtain as much
comparable insurance as available for the Insurance Amount.
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9.4 Employment Termination
If UTC, UTCSub or ICP choose to terminate, whether constructively or actually,
the employment of any employees (other than for cause) of ICP or any of its
subsidiaries within one year of the completion of the Offer, notice and
severance shall be provided to such employees in accordance with ICP's existing
severance practices, in each case to the extent disclosed in the Disclosure
Schedule or ICP's SEC Reports or except as may otherwise be agreed with the
relevant employee.
9.5 Indemnities
UTC agrees that if it acquires ICP Shares under the Offer it shall cause ICP to
fulfill its obligations pursuant to indemnities provided or available to past
and present officers and directors of ICP pursuant to the provisions of the ICP
Governing Documents, the Canada BCA, and the written indemnity agreements
entered into between ICP and its officers and directors, in each case to the
extent disclosed in the Disclosure Schedule or ICP's SEC Reports.
9.6 Compensation; Benefit Plans
Except as otherwise agreed with a relevant employee, UTC and UTCSub agree, and
after the Effective Time will cause ICP and any successor to ICP to agree, to
maintain until December 31, 1999 salaries and all benefit plans and compensation
programs currently available to employees of ICP or any of its subsidiaries,
including without limitation members of management of ICP or any of its
subsidiaries, or to make available until December 31, 1999 alternative benefit
plans and compensation programs which are comparable in the aggregate to those
currently available to such employees. For the purposes of this Section 9.6,
"benefit plans" means all arrangements, agreements, programs or policies,
whether funded or unfunded, relating to employees which ICP or any of its
subsidiaries is a party or by which it is bound and under which ICP or any of
its subsidiaries have any liability or contingent liability and relating to: (i)
retirement savings or pensions, including any defined benefit pension plan,
defined contribution plan, group registered retirement savings plan, thrift and
saving plan or supplemental pension or retirement plan; (ii) employee welfare
benefits, as defined for purposes of Section 3(1) of the Employee Retirement
Income Security Act of 1974 (United States), as amended, including
hospitalization, health, disability, life or severance pay benefits; and (iii)
profit sharing, bonus, stock incentive, stock purchase and other incentive plans
or programs.
ARTICLE 10
MUTUAL COVENANTS
10.1 Notification of Certain Matters
UTC shall give prompt notice to ICP, and ICP shall give prompt notice to UTC, of
(a) the occurrence, or non-occurrence, of any event the occurrence, or non-
occurrence, of which would cause (i) any representation or warranty contained in
this Agreement to be untrue or inaccurate or (ii) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied and
(b) any failure of UTC or ICP, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided,
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however, that the delivery of any notice pursuant to this Section 10.1 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
10.2 Competition Filings and Investment Canada Act Filing
(a) Without limiting UTC's and UTCSub's obligations under Section 9.1, UTC,
UTCSub and ICP shall, and shall cause their respective officers, employees,
representatives, advisors and agents to, (i) take promptly all actions
necessary to make the filings required of UTC, UTCSub, ICP or any of their
affiliates under the HSR Act, the Competition Act and any other similar
statute in other jurisdictions, (ii) comply at the earliest practicable
date with any request for additional information or documentary material
received by UTC, UTCSub, ICP or any of their affiliates from the U.S.
Department of Justice pursuant to the HSR Act or from the Canadian
Competition Bureau pursuant to the Competition Act or any other
Governmental Authority, as the case may be, and (iii) consult and cooperate
in connection with any investigation or other inquiry concerning the
transactions contemplated by this Agreement commenced by the U.S. Federal
Trade Commission or the Antitrust Division of the U.S. Department of
Justice or state attorneys general or by the Canadian Competition Bureau or
any other Governmental Authority, as the case may be.
(b) Each of the parties hereto shall promptly inform the other parties of any
material communication received by such party from the U.S. Federal Trade
Commission, the Antitrust Division of the U.S. Department of Justice, the
Canadian Competition Bureau or any other Governmental Authority regarding
any of the transactions contemplated hereby. UTC and UTCSub shall advise
ICP promptly of any understandings, undertakings or agreements which UTC
and UTCSub propose to make or enter into with the U.S. Federal Trade
Commission, the Antitrust Division of the U.S. Department of Justice, the
Canadian Competition Bureau or any other Governmental Authority in
connection with the transactions contemplated hereby.
(c) UTC, UTCSub and ICP shall, as promptly as practicable hereafter, make any
necessary filings under the Investment Canada Act and shall respond as
promptly as practicable to any inquiry from the Investment Review Division
of Industry Canada.
10.3 Other Filings
UTC, UTCSub and ICP shall, as promptly as practicable hereafter, prepare and
file any filings required under Securities Laws, the rules of The Toronto Stock
Exchange and the American Stock Exchange, or any other applicable law relating
to the transactions contemplated herein.
10.4 Additional Agreements
(a) Subject to the terms and conditions herein provided, each of the parties
hereto agrees to use all commercially reasonable efforts to take, and to
cause its officers, employees, representatives, advisors and agents to
take, all action and to do, or
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cause to be done, all things necessary, proper or advisable to consummate
and make effective as promptly as practicable the transactions contemplated
by this Agreement and to cooperate with each other in connection with the
foregoing, including using commercially reasonable efforts (i) to obtain
all necessary waivers, consents and approvals from other parties to
material agreements, leases and other contracts or agreements (including,
without limitation, the agreement of any persons as may be required
pursuant to any agreement, arrangement or understanding relating to ICP's
operations), (ii) to make all filings and obtain all necessary consents,
approvals and authorizations as are required to be obtained under any
federal, provincial or foreign law or regulations, (iii) to defend all
lawsuits or other legal proceedings challenging this Agreement or the
consummation of the transactions contemplated hereby, (iv) to cause to be
lifted or rescinded any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the
transactions contemplated hereby, (v) to effect all necessary registrations
and other filings and submissions of information requested by Governmental
Authorities and (vi) to fulfill all conditions and satisfy all provisions
of this Agreement and the Offer. For purposes of the foregoing, the
obligation to use "commercially reasonable efforts" to obtain waivers,
consents and approvals to loan agreements, leases and other contracts shall
not include any obligation to agree to a materially adverse modification of
the terms of such documents or to prepay or incur additional material
obligations to such other parties.
(b) Nothing in this Agreement (other than as expressly provided for in Section
2.1) shall obligate UTC or UTCSub (i) to keep the Offer open for acceptance
beyond the expiration date set forth in the Offer (as it may be extended
from time to time) or (ii) to take any action that, in the reasonable
judgment of UTC, would reasonably be expected to materially impair the
overall benefits to be realized by UTC from consummation of the Offer and
the other transactions contemplated by this Agreement.
10.5 Access to Information
Subject to the Confidentiality Agreement and upon reasonable notice, ICP shall
(and shall cause each of its subsidiaries to) afford UTC's officers, employees,
counsel, accountants and other authorized representatives and advisers
reasonable access, during normal business hours and until the expiration of this
Agreement, to all of its properties, books, contracts and records as well as to
its management personnel, and, during such period, ICP shall (and shall cause
each of its subsidiaries to) furnish promptly to UTC all information concerning
its business, properties and personnel as UTC may reasonably request.
10.6 Debt Obligations
ICP acknowledges that following completion of the Offer the modification or
elimination of the covenants contained in, and reduction of the outstanding
amount of, its existing debt obligations is integral to UTC's business plans.
ICP agrees to use reasonable efforts to cooperate and assist UTC in obtaining
consents to such modifications and in purchasing such obligations in
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furtherance of those plans, including the conduct of (or provision of assistance
to UTC in conducting) a consent solicitation and tender offer for the
outstanding debt securities of ICP or its subsidiaries on terms satisfactory to
UTC; provided that (i) ICP shall not be required to purchase any debt
obligations or pay any fees in connection with such efforts prior to
consummation of the Second Stage Transaction, unless funds therefore are
provided by UTC on terms satisfactory to ICP and (ii) UTC shall pay or reimburse
ICP for all reasonable expenses in connection therewith.
ARTICLE 11
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination
This Agreement may be terminated by written notice given to the other parties
hereto, at any time prior to completion of the transactions contemplated hereby:
(a) by mutual written consent of ICP and UTC;
(b) by either UTC or ICP (provided that the terminating party is not then in
breach, in any material respect, of any covenant or other agreement
contained herein and no representation or warranty of such terminating
party contained herein that is qualified as to materiality shall be untrue
or incorrect, and no representation or warranty of such terminating party
contained herein that is not so qualified shall be untrue or incorrect in
any material respect, at any time before the Effective Time, in each case,
as if made at and as of such time (or, to the extent such representation or
warranty speaks as of a specific date, no such representation or warranty
was so untrue or incorrect as of such date)), if there shall have been a
breach, in any material respect, of any covenant or other agreement
contained herein on the part of the other party or if any representation or
warranty of such other party contained herein that is qualified as to
materiality shall not be true and correct, or any representation or
warranty of such other party contained herein that is not so qualified
shall not be true and correct in all material respects, at any time before
the Effective Time, in each case as if made at and as of such time (or, to
the extent such representation or warranty speaks as of a specific date,
such representation or warranty was not so true and correct as of such
date), which breach or misrepresentation is not cured within 10 days
following written notice to such other party, or such breach, by its nature
or timing cannot be cured prior to the Expiry Time;
(c) by ICP, following receipt of, and in order to accept or recommend, a
Superior Take-over Proposal if, after consulting with outside counsel, the
Board of Directors of ICP has determined that such action is required in
order to discharge properly the directors' fiduciary duties under
applicable law;
(d) by UTC, if (i) the Board of Directors or any committee thereof of ICP
modifies or amends in any manner adverse to UTC or UTCSub, or withdraws,
its authorization, approval or recommendation of the Offer or this
Agreement or shall
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have resolved to do any of the foregoing or (ii) ICP or any of its
subsidiaries (or the Board of Directors or any committee thereof) shall
have approved, recommended, authorized, proposed or filed a document with
any Securities Authority not opposing, or publicly announced its intention
to enter into any Take-over Proposal (other than with UTC, UTCSub or any of
their affiliates), or shall have resolved to do any of the foregoing;
(e) by either UTC or ICP, if the Offer terminates or expires at the Expiry
Time, without UTCSub taking up and paying for any ICP Shares on account of
the failure of any of the Offer Conditions which has not been waived by
UTCSub, unless the absence of such occurrence shall be due to the failure
of the party seeking to terminate this Agreement to perform its requisite
obligations hereunder; or
(f) by either UTC or ICP, if the Take-up Date has not occurred on or prior to
December 15, 1999.
11.2 Effect of Termination and Other Events
(a) In the event of the termination of this Agreement as provided in Section
11. 1, this Agreement shall forthwith have no further force or effect and
there shall be no obligation on the part of UTC, UTCSub or ICP hereunder
except as set forth in Section 12.4 and this Section 11.2, which provisions
shall survive the termination of this Agreement. Nothing herein shall
relieve any party from liability for any breach of this Agreement.
(b) In the event of termination of this Agreement pursuant to Section 11.1(c)
or 11.1(d), ICP shall make payment to UTC by wire transfer of immediately
available funds of a fee in the amount of $15 million. Such fee shall be
payable concurrently with a termination pursuant to Section 11.1(c) (and
such termination shall not be effective until payment of such fee) and
within two Business Days after a termination pursuant to Section 11.1(d).
(c) In the event of termination of this Agreement pursuant to Section 11.1(e)
or 11.1(f) principally as a result of a failure to obtain the antitrust
approvals contemplated under clause (b) of the Offer Conditions, then,
within two Business Days after such termination, UTC shall make payment to
ICP by wire transfer of immediately available funds of a fee in the amount
of $10 million, provided, however, that no payment shall be due if ICP
shall have breached Sections 10.2, 10.3 or 10.4 contained herein.
(d) In the event a Take-over Proposal is announced publicly while the Offer is
open for acceptance and the minimum acceptance condition contemplated under
clause (a) of the Offer Conditions is not satisfied at the Expiry Time
(other than principally as a result of a failure to obtain the antitrust
approvals contemplated under clause (b) of the Offer Conditions), then,
within two Business Days after
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such Expiry Time, ICP shall make payment to UTC by wire transfer of
immediately available funds of a fee in the amount of $15 million.
(e) In the event a Take-over Proposal is announced publicly and made after the
Expiry Time but prior to March 31, 2000, then, if UTCSub did not take up
and pay for any ICP Shares under the Offer and ICP was not entitled to any
payment under Section 11.2(c), ICP shall within two Business Days of the
date on which such Take-over Proposal is made make payment to UTC by wire
transfer of immediately available funds of a fee in the amount of $15
million.
11.3 Amendment
This Agreement may be amended by mutual agreement between the parties hereto.
This Agreement may not be amended except by an instrument in writing signed by
the appropriate officers on behalf of each of the parties hereto.
11.4 Waiver
Each of UTC and UTCSub, on the one hand, and ICP, on the other hand, may (i)
extend the time for the performance of any of the obligations or other acts of
the other, (ii) waive compliance with any of the other's agreements or the
fulfilment of any conditions to its own obligations contained herein, or (iii)
waive inaccuracies in any of the other's representations or warranties contained
herein or in any document delivered by the other party hereto; provided,
however, that any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party.
ARTICLE 12
GENERAL PROVISIONS
12.1 Notices
All notices and other communications given or made pursuant hereto shall be in
writing and shall be deemed to have been duly given or made as of the date
delivered or sent if delivered personally or as of the date sent if sent by
cable, telegram, telecopier, telex or by prepaid overnight carrier to the
parties at the following addresses (or at such other addresses as shall be
specified by the parties by like notice):
(a) if to UTC and UTCSub:
United Technologies Corporation
One Financial Plaza
Hartford, CT 06101
Attention: Ari Bousbib
Telecopy No.: 860-728-6355
33
<PAGE>
and
United Technologies Corporation
One Financial Plaza
Hartford, CT 06101
Attention: General Counsel
Telecopy No.: 860-728-7862
with a copy to:
Stikeman, Elliott
Commerce Court West
Suite 5300, P.O. Box 85, Stn. Commerce Court
Toronto, ON M5L 1B9
Attention: William J. Braithwaite
Telecopy No.: 416-947-0866
(b) if to ICP:
501 Corporate Centre Drive, Suite 200
Franklin, TN 37067
Attention: David P. Cain
Telecopy No.: 615-771-4001
with a copy to:
Osler, Hoskin & Harcourt
1900, 333 7th Avenue S.W.
Calgary, AB T2P 2Z1
Attention: F.R. Allen
Telecopy No.: 403-260-7024
12.2 Miscellaneous
This Agreement (i) except for the Confidentiality Agreement, constitutes the
entire agreement and supersedes all other prior agreements and understandings,
both written and oral, between the parties, with respect to the subject matter
hereof, and (ii) shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns and no other person. The
parties hereto shall be entitled to rely upon delivery of an executed facsimile
copy of the Agreement, and such facsimile copy shall be legally effective to
create a valid and binding agreement among the parties hereto. The parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to
34
<PAGE>
enforce specifically the terms and provisions hereof in any court of the
Province of Ontario having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
12.3 Assignment
Except as expressly permitted by the terms hereof, neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto without the prior written consent of the other parties.
UTCSub may assign all of its rights or obligations under this Agreement to a
direct or indirect wholly-owned subsidiary of UTC, provided that any such
assignment will have no material adverse tax or other effects to ICP or the
holders of ICP Shares, and provided further that if such assignment takes place,
UTC and UTCSub shall continue to be liable to ICP for all obligations under this
Agreement and for any default in performance by the assignee.
12.4 Expenses
Except as provided in Sections 10.6 and 11.2, all fees, costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such cost or expense, whether or not
the Offer is consummated.
12.5 Severability
Whenever possible, each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law. Any provision of this
Agreement that is invalid or unenforceable in any jurisdiction shall be
ineffective to the extent of such invalidity or unenforceability without
invalidating or rendering unenforceable the remaining provisions hereof, and any
such invalidity or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
12.6 Survival
Except as otherwise provided in this Section 12.6, none of the representations,
warranties or covenants in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time or, in the case of
ICP, shall survive the acceptance of, and payment for, any ICP Shares by UTCSub
pursuant to the Offer. This Section 12.6 shall not limit any covenant or
agreement of the parties which by its terms contemplates performance after the
Effective Time.
12.7 Counterpart Execution
This Agreement may be executed in any number of counterparts and each such
counterpart shall be deemed to be an original instrument but all such
counterparts together shall constitute one agreement.
35
<PAGE>
IN WITNESS WHEREOF, UTC, UTCSub and ICP have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
UNITED TECHNOLOGIES CORPORATION
By: /s/ Ari Bousbib
-----------------------
Name: Ari Bousbib
Title: Vice President
TITAN ACQUISITIONS, LTD.
By: /s/ Ari Bousbib
-----------------------
Name: Ari Bousbib
Title: President
INTERNATIONAL COMFORT PRODUCTS CORPORATION
By: /s/ Richard W. Snyder
-----------------------
Name: Richard W. Snyder
Title: Chairman
36
<PAGE>
EXHIBIT 2
UNITED TECHNOLOGIES CORPORATION
================================================================================
Contact: Matt Chadderdon
Carrier Corp.
315-432-6625
Carrier Corp. to Purchase International Comfort Products Corp.
FARMINGTON, CT, June 24, 1999 -- Carrier Corp., a wholly owned subsidiary
of United Technologies Corp. (UTC) (NYSE:UTX), today announced the signing of an
agreement to purchase International Comfort Products Corp. (ICP) (AMEX:ICP)
headquartered in Nashville, TN for $11.75 per share in cash.
ICP manufactures and markets central air conditioning and heat pump
systems, gas and oil furnaces, air handlers and component parts and accessories.
ICP's products are marketed under the Heil, Tempstar, Arcoaire, Comfortmaker,
Airquest, Keeprite, Lincoln, Dettson, and Clare brandnames. Its worldwide sales
for 1998 were $733.5 million.
Carrier, with 1998 worldwide sales of $6.9 billion, manufactures and
markets heating, ventilating, air conditioning and refrigeration systems and
equipment. UTC will commence a tender offer for all of the outstanding shares of
common stock of ICP no later than June 30, 1999. UTC will pay a purchase price
of approximately $490 million in cash for all of the outstanding shares of ICP
and will assume approximately $230 million in debt.
The transaction is subject to regulatory approvals and the valid tender of
at least 71 percent of ICP shares, as well as other customary conditions. The
directors of ICP are unanimously recommending that all ICP shareholders accept
UTC's offer.
ICP's largest shareholders, Ravine Partners, an affiliate of SnyderCapital
Corp., and the Ontario Teachers' Pension Plan Board, together holding
approximately 40 percent of ICP's shares, have agreed to tender their shares and
support the transaction.
"The proposed acquisition by UTC represents excellent value for our
stockholders, and outstanding opportunities for our distributors, dealers, and
employees," said Richard W. Snyder, chairman of ICP Corporation.
"This transaction will enhance our ability to continue to serve our
customers with the full backing of the resources of United Technologiess Corp.,"
stated W. Michael Clevy, president of ICP Corporation.
ICP will retain its current operational structure, sales infrastructure,
distribution and dealer networks, and brands.
The companies intend to generate significant cost savings by accelerating
implementation of advanced manufacturing practices and product delivery systems
as well as achieving greater efficiencies in all areas of operations, including
purchasing synergies and technology integration. Carrier expects the annual
pretax integration benefits to exceed $50 million within three years.
"The acquisition of ICP is an exciting opportunity for Carrier Corp. to
offer
<PAGE>
complementary products and brands, to access new market channels, and to serve a
new customer base. Integrating administrative, manufacturing, and engineering
operations will enable both companies to become more efficient and effective in
serving customers," said John R. Lord, president of Carrier Corp.
Carrier Corp. is a subsidiary of United Technologies Corp. a provider of a broad
range of high technology products and support services to the aerospace and
building systems industries.
2
<PAGE>
EXHIBIT 3
19 March, 1999
Mr. Ari Bousbib
Vice President Strategic Planning
United Technologies Corporation
United Technologies Bldg.
Hartford, CT 06101
Dear Mr. Bousbib:
You have expressed interest in pursuing a transaction (the "Transaction")
involving the capital stock or assets of International Comfort Products
Corporation (the "Company"). You understand that prior to or during the course
of negotiations in respect of the Transaction, certain confidential information
concerning the Company and/or the Company's affiliates, including, without
limitation, the Information Memorandum prepared in connection therewith, may be
disclosed to you or your directors, officers, employees, affiliates and advisors
(your "Representatives"), either in written form or orally (the "Evaluation
Material"). In consideration of the Company agreeing to make the Evaluation
Material available to you or your Representatives, you agree as follows:
1. No disclosure of your interest in the Company will be made by you or your
Representatives prior to the execution of a definitive, written purchase
agreement between you and the Company in respect of the Transaction, except
as may be otherwise agreed upon by you and the Company.
2. The fact that the Company is providing Evaluation Material to you, the fact
that the parties have had, are having or may have discussions concerning the
Transaction, and any negotiations that may occur between you and the Company
shall also be deemed Evaluation Material and treated in accordance with the
provisions hereof. All Evaluation Material will be held in complete
confidence (i.e., using the same degree of care that you use for your own
confidential, non-public proprietary information of a similar nature) and,
without the Company's prior written consent, will not be disclosed, in whole
or in part, to any other person (other than such of your Representatives who
need access to any such materials or information for purposes of your
evaluating or negotiating the Transaction), nor will any Evaluation Material
be used in any way directly or indirectly detrimental to the Company or its
affiliates or for any purpose other than your evaluation or negotiation of
the Transaction. The term "Evaluation Material" does not include any
information:
(a) which, at the time of disclosure to you or your Representatives, is in
the public domain or which after such disclosure comes into the public
domain through no fault of you or your Representatives;
(b) which was available to you on a non-confidential basis from a source
other than the Company or its advisors, provided that such source is
not and was not bound by a confidentially agreement with the Company;
<PAGE>
Mr. Ari Bousib, p. 2
(c) which, after notifying the Company pursuant to paragraph 5, is required
by applicable law or regulatory authority to be disclosed; or
(d) which was independently developed by you.
3. You shall be responsible for ensuring that your Representatives adhere to
the terms of the undertakings of this agreement as if such persons were
original parties hereto.
4. You and your Representatives will, at your option, either destroy or return
to the Company upon demand or in the event you cease to be interested in
pursuing the Transaction, all Evaluation Material provided to you or your
Representatives, including all copies thereof which may have been made by or
on behalf of you or your Representatives. You shall destroy, or cause to be
destroyed, all notes or memoranda or other stored information of any kind
prepared by you or your Representatives relating to the Evaluation Material
or negotiations generally.
5. If you or your Representatives become (or if it is reasonably likely that
you or they shall become) legally compelled to disclose any Evaluation
Material, prompt notice of such fact shall be given to the Company so that
appropriate action may be taken by the Company.
6. Without prejudice to any other rights or remedies the Company may have, you
acknowledge and agree that money damages may not be an adequate remedy for
any breach of this agreement and that the Company may be entitled to the
remedies of injunction, specific performance and other equitable relief for
any threatened or actual breach of this agreement.
7. You acknowledge that, except as may be set forth in a definitive, written
purchase agreement in respect of the Transaction, neither the Company nor
any of its directors, officers, employees, affiliates or advisors shall have
been deemed to make, or shall be responsible for, any representations or
warranties, express or implied, with respect to the accuracy or completeness
of the Evaluation Material supplied under this agreement. Further, it is
acknowledged hereby by you that only those representations and warranties
made by the Company in a definitive, written purchase agreement in respect
of the Transaction shall have any force or effect.
8. During the period of one year commencing on the date hereof, you shall not
solicit or actively seek to hire any person who during such period is
employed by the Company, whether or not such person would commit any breach
of such person's contract of service in leaving such employment. This
provision shall not apply to any general solicitation for employment not
specifically targeted at such employee.
9. You agree that until six months from the date of this agreement, you will
not without the prior approval of the Board of Directors of the Company (i)
acquire or make any proposal to acquire any securities or property of the
Company, (ii) propose to enter into any merger or business combination
involving the Company or purchase a material portion of the assets of the
Company; (iii) make or participate in any solicitation of proxies to vote,
or seek to advise or influence any person with respect to the voting of any
securities of
<PAGE>
Mr. Ari Bousbib, p. 3
the Company, (iv) form, join or participate in a "group" (within the meaning
of Section 13(d)(3) of the Securities Exchange Act of 1934) with respect to
any voting securities of the Company, (v) otherwise and to seek to control
or influence the management, Board of Directors or policies of the Company,
(vi) disclose any intention, plan or arrangement inconsistent with the
foregoing or (vii) take any action which might require the Company to make a
public announcement regarding the possibility of a business combination or
merger. This provision shall not apply to investments in the Company that
are made by or through your employee pension fund in the ordinary course and
without your specific direction.
10. You acknowledge and confirm that no limitation provided, or statements made,
to you or your Representatives prior to, in the course of or for the purpose
of negotiations, will constitute an offer by the Company or on the Company's
behalf, nor will any such information or statements form the basis of any
contract or agreement (including, without limitation, an agreement in
principle), to sell the Company or any of its capital stock or assets.
11. You acknowledge that the Company and the Company's advisors shall be free to
conduct the process in respect of the Transaction as they in their sole
discretion shall determine, including, without limitation, negotiating with
any prospective or interested parties.
12. You will maintain contact with the Company at all times only through Credit
Suisse First Boston Corporation, the Company's financial advisor, and will
not attempt any direct communication with the Company relating to the
Transaction without the express permission of Credit Suisse First Boston
Corporation.
13. No failure or delay by the Company in exercising any right, power or
privilege under this agreement shall operate as a waiver thereof, and no
modification hereof shall be effective, unless in writing and signed by an
officer of the Company or other authorized person on its behalf.
14. The illegality, invalidity or unenforceability of any provision hereof under
the laws of any jurisdiction shall not affect its legality, validity or
enforceability under the laws of any other jurisdiction, nor the legality,
validity or enforceability of any other provision.
<PAGE>
15. This agreement shall terminate two years from the date hereof.
This agreement shall be governed by and construed in accordance with the laws of
the State of New York, applicable to contracts made and to be performed therein.
Very truly yours,
International Comfort Products Corporation
By CREDIT SUISSE FIRST BOSTON
CORPORATION, solely as the Company's
Representative
By: /s/ David M. Sultan
--------------------------
Name: David M. Sultan
Title: Director
Accepted and agreed to as of the date hereof:
United Technologies Corporation
By: /s/ Ari Bousbib
------------------------
Name: Ari Bousbib
Title: Vice President Strategic Planning
<PAGE>
Exhibit 5
[LOGO OF ICP]
W. Michael Clevy
President
Chief Executive Officer
Dear Shareholder:
On behalf of the Board of Directors of International Comfort Products
Corporation (the "Company"), I am pleased to inform you that the Company
entered into a Pre-Acquisition Agreement dated as of June 23, 1999 (the
"Agreement"), with United Technologies Corporation ("Parent") and Titan
Acquisitions, Ltd. (the "Purchaser"), a wholly-owned subsidiary of Parent,
pursuant to which the Purchaser has commenced a cash tender offer (the
"Offer") to purchase all of the Company's outstanding ordinary shares (the
"Shares") at U.S.$11.75 per Share in cash (the "Offer Price"). Following the
successful completion of the Offer, upon the terms and subject to the
conditions contained in the Agreement, the Purchaser will use its reasonable
best efforts to consummate a second step transaction at the Offer Price
(through a share consolidation, compulsory acquisition, amalgamation or other
appropriate transaction) in order to acquire the remaining Shares that are not
tendered pursuant to the Offer. As discussed in the enclosed materials,
certain holders of Shares, representing approximately 36.9% of the Shares,
have entered into agreements to tender their Shares in the Offer.
The Board of Directors of the Company, by a unanimous vote of all directors
present, has determined that the Agreement and the transactions contemplated
thereby, including the Offer, upon the terms and subject to the conditions set
forth in the Agreement are fair to, and in the best interests of, the Company
and stockholders and has approved the Offer and the Agreement and recommends
that the stockholders of the Company accept the Offer and tender their Shares
to the Purchaser pursuant to the Offer.
In arriving at its decision, the Board of Directors gave careful
consideration to a number of factors described in the
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
which is being filed today with the United States Securities and Exchange
Commission. The Board has received a written opinion dated June 23, 1999 of
Credit Suisse First Boston, the Company's financial advisor, to the effect
that, as of such date and based upon and subject to the matters stated in such
opinion, the U.S.$11.75 per Share cash consideration to be received in the
Offer by the holders of Shares was fair, from a financial point of view, to
such holders. The Schedule 14D-9, together with a Directors' Circular, which
was prepared pursuant to Canadian law and contains similar information to that
contained in the Schedule 14D-9, is being sent to the Company's shareholders.
Each of the Schedule 14D-9 and Directors' Circular describes the Board's
decision and contains other important information relating to that decision.
We urge you to read one carefully.
Also accompanying this letter is the Purchaser's Offer to Purchase and
Circular, dated June 30, 1999, together with related materials including a
letter of transmittal to be used for tendering your Shares. These documents
set forth the terms and conditions of the Offer and provide instructions as to
how to tender your Shares. I urge you to read the enclosed materials carefully
and consider all factors set forth therein before making your decision with
respect to the Offer.
I personally, along with the entire Board of Directors, management and
employees of the Company, thank you for the support you have given the
Company.
Very truly yours,
/s/ W. Michael Clevy
W. Michael Clevy
President and Chief Executive
Officer
<PAGE>
Exhibit 6
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INTERNATIONAL COMFORT PRODUCTS CORPORATION
DIRECTORS' CIRCULAR
RELATING TO THE OFFER BY TITAN ACQUISITIONS, LTD.,
A SUBSIDIARY OF UNITED TECHNOLOGIES CORPORATION,
TO PURCHASE ALL OF THE
ORDINARY SHARES OF
INTERNATIONAL COMFORT PRODUCTS CORPORATION
RECOMMENDATION
----------------
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT HOLDERS OF ORDINARY SHARES
ACCEPT THE OFFER.
June 30, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INTERNATIONAL COMFORT PRODUCTS CORPORATION
DIRECTORS' CIRCULAR
This Directors' Circular is issued by the Board of Directors (the "Board")
of International Comfort Products Corporation (the "Company" or "ICP") in
connection with the offer (the "Offer") made June 30, 1999 by Titan
Acquisitions, Ltd. (the "Offeror"), a direct wholly-owned subsidiary of United
Technologies Corporation ("UTC"), to purchase for cash all of the outstanding
ordinary shares of the Company (including ordinary shares of the Company
issuable upon exercise of outstanding stock options) (collectively the
"Shares") upon the terms and conditions set forth in the Offer and
accompanying circular (the "Offering Circular") of the Offeror dated June 30,
1999. The Offering Circular indicates that the Offer price is U.S. $11.75 per
Share (the "Offer Price").
The terms and conditions of the Offer, the method of acceptance of the Offer
and other information relating to the Offer, the Company, UTC and the Offeror
are set out in the Offer and the Offering Circular, the Letter of Transmittal
and the Notice of Guaranteed Delivery which accompany the Offer.
All dollar amounts in this Directors' Circular are expressed in United
States dollars, unless otherwise indicated. As at June 29, 1999, the noon
buying rate in New York City for cable transfers in Canadian dollars was U.S.
$1.00 = C$1.4760.
RECOMMENDATION OF THE BOARD
The Board has considered the Offer and reviewed it with Credit Suisse First
Boston Corporation, its financial advisor ("CSFB"). The Board is of the view
that the Offer is fair to the shareholders of the Company.
THE BOARD UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS ACCEPT THE OFFER.
Reasons for Recommendation of the Board
After considering the Offer and other matters it considered relevant, the
Board unanimously resolved to recommend that holders of the Shares accept the
Offer.
In arriving at that conclusion, the Board relied upon and considered, among
other things, the following:
. the familiarity of the Board with the Company's business, financial
condition, results of operations, properties and prospects as an
independent entity, and the nature of the industry in which it operates,
based in part upon presentations by the Company's management;
. the Offer Price represents a premium of $3.20 or approximately 37.4%
over the average closing price of the Shares reported on the American
Stock Exchange for the three calendar month period ended June 23, 1999,
the last trading day prior to the public announcement of the Offer on
June 24, 1999. In focussing on the premium over the average Share price
during the three months prior to the date of the public announcement of
the Offer, the Board acknowledged the significant increase in the
Company's stock price during the month prior to the public announcement
of the Offer;
. the fact that Ravine Partners, Ltd. ("Ravine Partners") and Ontario
Teachers' Pension Plan Board ("Ontario Teachers") have agreed with the
Offeror to tender an aggregate of 38.76% of the outstanding Shares (on
an undiluted basis) under the Offer;
. that the Offer is for all of the Shares;
1
<PAGE>
. the opinion dated June 23, 1999, of CSFB described below (a copy of
which is attached hereto as Appendix "A") that, as of such date and
based upon and subject to the matters set forth therein, the
consideration to be received by the shareholders of the Company under
the Offer and in the Second Stage Transaction (as defined in the Pre-
Acquisition Agreement) was fair to such shareholders from a financial
point of view;
. information regarding the financial, operating and stock price history
of the Company in comparison to selected comparable companies, including
certain of the Company's competitors;
. consideration of other possible acquirors of the Company;
. that the Pre-Acquisition Agreement described under "Agreements with
United Technologies Corporation and the Offeror" is structured to permit
the Company, upon determination of the Board that such action would
further the best interests of the shareholders of the Company, to
respond to any written unsolicited Superior Take-over Proposal (as
hereinafter defined) and to furnish information to and to negotiate with
the party making such Superior Take-over Proposal, provided that the
acceptance or recommendation of any such Superior Take-over Proposal may
entitle the Offeror to a termination fee;
. the terms and conditions of the Pre-Acquisition Agreement, including
that ICP or the Offeror could, under certain circumstances, be entitled
to a termination fee; and
. that the Offer is not subject to a financing condition.
The foregoing discussion of the information and factors considered and given
weight by the Board is not intended to be exhaustive. In view of the wide
variety of factors considered in connection with its evaluation of the Offer,
the Board did not find it practicable to, and did not quantify or otherwise
attempt to assign relative weights to the specific factors considered in
reaching its determinations and recommendation. In addition, individual
members of the Board may have given different weight to different factors.
Shareholders should nevertheless consider the Offer carefully and come to
their own decision as to acceptance or rejection of the Offer. Shareholders
who are in doubt as to how to respond to the Offer should consult their
investment dealer, stockbroker, chartered accountant, lawyer or other
professional advisor.
BACKGROUND TO THE OFFER
As part of its responsibilities, the Board considers and reviews from time
to time strategic alternatives available to the Company. In light of the
interest of Ravine Partners and Ontario Teachers in possibly selling some or
all of their respective holdings of Shares and the interest of the President
and Chief Executive Officer in possibly being part of a group which might make
an offer for the Company, the Board established on January 20, 1999 a
committee of directors (the "Special Committee") to consider strategic
alternatives available to the Company.
The members of the Special Committee are Messrs. Stanley M. Beck, Q.C.,
Marvin G. Marshall, David A. Rattee and William A. Wilson. Each of these
directors is an independent member of the Board, is independent of Ravine
Partners and Ontario Teachers and is independent of UTC and the Offeror. The
Special Committee has met frequently on a formal and an informal basis
(primarily by conference telephone) during the past six months amongst
themselves and together with, among others, management, CSFB, Ravine Partners,
Ontario Teachers and legal counsel to each of the Company and CSFB.
On January 26 and 28, 1999, members of the Special Committee met separately
with representatives of three nationally recognized investment banking firms
and received from each of them a presentation on their respective credentials
to assist the Special Committee and the Board and to act as financial advisor
in connection with the Company's review of strategic alternatives. Following
these presentations, the Special Committee unanimously
2
<PAGE>
recommended, and the Board unanimously authorized and approved on February 3,
1999, the appointment of CSFB as financial advisor to the Company. CSFB was
retained and an engagement letter between the Company and CSFB was negotiated
and executed.
Following its due diligence review of the Company, CSFB discussed initially
with the Special Committee, and subsequently with the Board on March 9, 1999,
its views on the Company, potential industry and financial buyers and
recommendations with respect to the strategic review process. After discussion
with CSFB, the Board authorized the Special Committee and CSFB to pursue a
confidential selective sale process in order to determine whether there was
any third party interest in an acquisition of the Company.
CSFB initially approached more than 40 potential industry and financial
buyers, including UTC, in order to solicit preliminary indications of interest
in an acquisition of the Company. The Company received preliminary indications
of interest from more than 20 parties, including UTC. Confidentiality and
standstill agreements were forwarded to these parties and such agreements were
negotiated and entered into by the Company with these parties, including UTC.
A confidential information memorandum relating to the Company and its
businesses, which had been prepared by CSFB in conjunction with senior
management of the Company, was delivered to the parties, including UTC, who
had signed a confidentiality agreement. Further indications of interest in a
potential acquisition of the Company were received from interested parties,
including UTC, on April 23, 1999. Following discussions with CSFB about the
respective levels of interest from these parties, the Special Committee
directed CSFB to continue to deal with a select group of these parties,
including UTC. Each of these parties, including UTC, was invited to conduct
due diligence with respect to the Company and to attend a confidential
management presentation focussing on the Company and its businesses.
During the week of May 24, 1999, at the request of the Special Committee,
CSFB forwarded to each of the final round bidders, including UTC, a formal
request that any offer to acquire all of the Shares be made in writing by June
15, 1999. Accompanying the bid request was a form of pre-acquisition agreement
which each party was asked to review and indicate any necessary changes
thereon for purposes of that party's offer. Each of the final round bidders,
including UTC, responded to CSFB's request with an acquisition proposal,
together with a marked-up copy of the pre-acquisition agreement or a
memorandum setting out their principal concerns with the agreement. At a
meeting held on June 16, 1999, the respective terms and conditions of the
final round offers were reviewed with the Special Committee by CSFB and legal
counsel for CSFB and the Company. The Special Committee was also advised that
a key term of the UTC offer was that Ravine Partners and Ontario Teachers
enter into agreements with the Offeror under which they would agree to tender,
and grant an option to transfer their Shares, to the Offeror (the "Shareholder
Agreements"). As well, the Special Committee received a report on the course
of discussions which had taken place earlier on June 16, 1999 relating to the
UTC offer and its terms and conditions at a meeting involving representatives
of UTC, its legal counsel, CSFB, a member of the Special Committee and legal
counsel for CSFB and the Company. Following questions by, and discussions
among, members of the Special Committee, CSFB was instructed to contact each
of the final round bidders to discuss certain aspects of their proposals.
Following discussions between UTC and CSFB on June 17, 1999 and June 18,
1999 concerning UTC's proposal, the Special Committee instructed CSFB and
legal counsel for the Company to meet with representatives of UTC and its
legal advisors to negotiate the final terms of the pre-acquisition agreement,
(which the parties agreed would provide for the making of an offer for all of
the Shares by the Offeror at a price of $11.75 per Share). Such negotiations
commenced on June 21, 1999 and were intensively conducted through June 21, 22
and 23, 1999. During this period, the status and subject matter of
negotiations were discussed with the Chairman of the Special Committee, and
UTC independently negotiated the terms of the Shareholder Agreements with
Ravine Partners and Ontario Teachers.
The Special Committee met at noon on June 23, 1999 and received a further
report from CSFB on the final round offers to acquire the Shares of the
Company. CSFB reviewed various aspects of each of the offers with the Special
Committee, including CSFB's assessment of the overall value of each offer, the
conditions and terms of the respective offers (including financing), break-fee
arrangements and other factors. CSFB also confirmed its
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ability to provide the Board with a fairness opinion with respect to the UTC
offer. The Special Committee was also updated by legal counsel on the status
of negotiations on the pre-acquisition agreement. Following these
presentations and discussions and after deliberations, the Special Committee
concluded unanimously that the UTC offer of $11.75 cash per Share was an offer
which the Board of Directors could approve and recommend for acceptance by the
holders of Shares.
The Board of Directors met at 2:00 p.m. on June 23, 1999. Eleven of the
twelve directors attended and participated in person or telephonically at this
meeting. At the outset of the meeting, the Board received a report from the
Chairman of the Special Committee. The report provided the Board with an
update on the confidential selective sale process concluding with the Special
Committee's view on the final round offers made for the Company and its
recommendation that the UTC offer was an offer which the Board could approve
and recommend for acceptance by the holders of Shares. CSFB provided the Board
with its review of the final round offers, their respective terms and
conditions and their assessment of the relative values contemplated by the
offers. Legal counsel briefed the Board on the fiduciary duties of directors
and other matters of Canadian corporate law and on certain regulatory matters.
As well, counsel reviewed with the Board the terms and conditions of the
proposed pre-acquisition agreement with UTC, including the (i) terms of the
offer; (ii) offer conditions; (iii) no solicitation limitation; (iv) fiduciary
duty exception for a Superior Take-over Proposal; (v) events of termination;
(vi) mutual termination fees; (vii) covenants, representations and warranties
of the Company, the Offeror and UTC; (viii) conduct of ICP's business during
the offer period; and (ix) other key terms and provisions. CSFB then completed
its review of the fairness of the UTC offer from a financial point of view.
CSFB delivered an oral opinion to the Board, which was subsequently confirmed
in writing, that, as of June 23, 1999 and based upon and subject to the
matters reviewed with the Board, the consideration to be received by the
shareholders of the Company in the Offer and in the Second Stage Transaction
was fair to the shareholders from a financial point of view. A copy of the
CSFB opinion is attached hereto as Appendix "A".
After these presentations on the UTC offer and after deliberation with
respect thereto, the Board of Directors unanimously (i) determined that the
UTC offer is fair to holders of Shares and is in the best interests of ICP;
(ii) approved the UTC offer; (iii) authorized and approved the execution and
delivery of the Pre-Acquisition Agreement; (iv) resolved to recommend
acceptance of the UTC offer by holders of Shares; and (v) determined to elect,
to the extent permitted by law, not to be subject to certain forms of anti-
takeover laws and regulations.
After the close of trading on June 23, 1999, the Company, UTC and the
Offeror executed the Pre-Acquisition Agreement. Also on June 23, 1999, Ravine
Partners and Ontario Teachers entered into their respective Shareholder
Agreements with the Offeror.
Early on June 24, 1999, the Company and UTC issued a press release
announcing the execution of the Pre-Acquisition Agreement and the Shareholder
Agreements. On June 30, 1999, the Offer was commenced.
AGREEMENTS WITH UNITED TECHNOLOGIES CORPORATION
AND THE OFFEROR
The Pre-Acquisition Agreement
On June 23, 1999, UTC, the Offeror and the Company entered into the Pre-
Acquisition Agreement pursuant to which UTC and the Offeror agreed to make the
Offer. The following is a summary of certain material provisions of the Pre-
Acquisition Agreement.
The Offer. The Pre-Acquisition Agreement provides for the commencement of
the Offer as promptly as practicable, but in no event later than five (5)
business days after the date of the public announcement of the execution of
the Pre-Acquisition Agreement.
The Pre-Acquisition Agreement provides that the obligation of the Offeror
to, and of UTC to cause the Offeror to, consummate the Offer and accept for
payment, and pay for, any Shares tendered and not withdrawn
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pursuant to the Offer is subject only to the conditions set forth below under
"--Certain Conditions of the Offer" (the "Offer Conditions") (any of which may
be waived in whole or in part by the Offeror in its sole discretion). The
Offeror expressly reserved in the Pre-Acquisition Agreement the right, subject
to applicable Securities Laws, to modify the terms of the Offer, except that,
without the express written consent of the Company, the Offeror shall not (i)
reduce the number of Shares subject to the Offer, (ii) reduce the Offer Price,
(iii) add to or modify the Offer Conditions, (iv) except as provided in the
next paragraph, change the expiration date of the Offer, (v) change the form
of consideration payable in the Offer or (vi) amend, alter, add or waive any
term of the Offer in any manner that is, in the opinion of the Company,
adverse to the holders of the Shares.
The Pre-Acquisition Agreement provides that, notwithstanding the foregoing,
(A) if on any scheduled expiration date of the Offer, all of the Offer
Conditions have not been satisfied or waived, the Offeror shall, unless in the
reasonable judgment of UTC all of the Offer Conditions cannot be satisfied or
waived on or prior to December 15, 1999, from time to time, extend the Offer
for such period of time as is necessary to satisfy or fulfill such conditions,
(B) Offeror may extend the Offer for any period required by any rule,
regulation, interpretation or position of any appropriate securities
commissions or similar regulatory authorities in Canada and each of the
provinces and territories thereof and in the United States and each of the
states thereof (the "Securities Authorities") applicable to the Offer, or to
permit the Company to cure any misrepresentation, breach or non-performance
during the time period referred to in the proviso to clause (d) of the Offer
Conditions (See "--Certain Conditions to the Offer" below), and (C) Offeror
may extend the Offer for up to ten (10) business days (but not beyond December
15, 1999) if there has been validly tendered (and not properly withdrawn)
prior to the expiration of the Offer such number of Shares that would
constitute at least 80%, but less than 90%, of the issued and outstanding
Shares as of the date of determination. The Pre-Acquisition Agreement provides
that subject only to the Offer Conditions, the Offeror shall, and UTC shall
cause the Offeror to, pay, as soon as practicable after the expiration of the
Offer, for all Shares validly tendered (and not properly withdrawn) that
Offeror becomes obligated to accept pursuant to the Offer.
Directors. The Pre-Acquisition Agreement provides that promptly upon the
purchase by the Offeror of outstanding Shares pursuant to the Offer, and from
time to time thereafter, UTC shall be entitled to designate such number of
directors (rounded up to the next whole number) on the Board as will give UTC,
subject to compliance with Section 14(f) of the United States Securities
Exchange Act of 1934, as amended (the "Exchange Act"), representation equal to
the product of the total number of directors on the Board (giving effect to
the directors elected pursuant to this sentence) multiplied by the percentage
that the aggregate number of Shares beneficially owned by UTC or any affiliate
of UTC following such purchase bears to the total number of Shares then
outstanding, and the Company shall, at such time, take all actions necessary
to cause UTC's designees to be so appointed (including increasing the size of
the Board or securing the resignation of incumbent directors, or both). The
Pre-Acquisition Agreement provides that the Company shall take all actions
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder, and shall include in its Schedule 14D-9 required by the United
States Securities and Exchange Commission (the "Commission") such information
with respect to the Company and its officers and directors as is required
under Section 14(f) and Rule 14f-1 to fulfill such obligations (provided,
however, that UTC shall supply to the Company and be solely responsible for
any information with respect to UTC and its nominees, officers, directors and
affiliates required by such Section 14(f) and Rule 14f-1).
Following the appointment of UTC's designees prior to consummation of the
Second Stage Transaction, any amendment of the Pre-Acquisition Agreement or of
the Company's Certificate and Articles of Continuation or By-laws (the
"Governing Documents"), any termination of the Pre-Acquisition Agreement by
the Company, any extension by the Company of the time for performance of any
obligation or other act of UTC under the Pre-Acquisition Agreement, or any
waiver thereof, any waiver of any condition to the obligations of the Company
or any of the Company's rights under the Pre-Acquisition Agreement or other
action by the Company shall require the concurrence of a majority of the
directors of the Company then in office who were not designated by UTC, which
action shall be deemed to constitute the action of the full Board even if such
majority does not constitute a majority of all directors then in office.
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Stock Options. The Pre-Acquisition Agreement provides that the Company shall
cause the vesting of option entitlements under the International Comfort
Products Corporation Employee Stock Option Plan and the International Comfort
Products Corporation 1998 Employee Stock Option Plan (the "Stock Option
Plans") to accelerate prior to or concurrent with the expiration of the Offer,
such that all outstanding options to purchase Shares (a "Company Option") are
exercisable prior to or concurrent with the expiration of the Offer. At the
time that the Offeror shall have acquired ownership of and paid for Shares
pursuant to the Offer (the "Effective Time"), each holder of a then
outstanding Company Option shall, in settlement thereof, be entitled to
receive from the Company, and shall be paid in full satisfaction for each
Share subject to such Company Option an amount (subject to any applicable
withholding tax) in cash equal to the product of (i) the excess of the Offer
Price over the per share exercise or purchase price of such Company Option and
(ii) the number of Shares subject to such Company Option. Upon receipt of such
consideration, each such Company Option shall be cancelled. The surrender of a
Company Option to the Company in exchange for such consideration shall be
deemed a release of any and all rights the holder had or may have had in
respect of such Company Option. The Stock Option Plans shall terminate as of
the Effective Time and any and all rights under any provisions in any other
plan, program or arrangement providing for the issuance or grant of any other
interest in respect of the capital stock of the Company or any subsidiary
thereof shall be cancelled by the Company as of the Effective Time.
Employment Agreements and Termination. In the Pre-Acquisition Agreement, the
Offeror agreed, and after the Effective Time agreed to cause the Company and
any successor to the Company to agree, to honour and comply with the terms of
any existing executive termination and severance agreements, plans or policies
of the Company and its subsidiaries. In addition, if UTC, the Offeror or the
Company choose to terminate, whether constructively or actually, the
employment of any employees (other than for cause) of the Company or any of
its subsidiaries within one year of the completion of the Offer, notice and
severance shall be provided to such employees in accordance with the Company's
existing severance practices.
Representations and Warranties. The Pre-Acquisition Agreement contains
various customary representations and warranties of one or all of the parties
thereto, including representations by the Company with respect to the
following: (i) corporate organization, qualification and authority to do
business, (ii) corporate authority, (iii) absence of conflicts under the
Company's governing documents or material contracts and absence of
governmental or legal restrictions, (iv) authorized and outstanding capital,
(v) absence of material adverse change, (vi) absence of material undisclosed
liabilities, (vii) absence of brokerage fees, (viii) conduct of business, (ix)
absence of material misstatements in filings made with Securities Authorities,
(x) United States registration, (xi) ownership of subsidiaries, (xii) absence
of material litigation, (xiii) insurance, (xiv) absence of undisclosed
material environmental liabilities, (xv) Company benefit plans, (xvi) tax
matters, (xvii) "Year 2000" compliance, (xviii) absence of material defaults
or violations of law, and (xvix) the Company's borrowing capacity under
certain debt instruments applicable to the Company; and representations and
warranties of UTC and the Offeror with respect to the following: (i)
organization, qualification and authority to do business, (ii) corporate
authority, (iii) absence of conflicts under the Company's governing documents
or material contracts and absence of governmental or legal restrictions, (iv)
availability of funds to pay for Shares tendered pursuant to the Offer or
acquired in any Second Stage Transaction, and (v) absence of certain
litigation. None of the representations and warranties of the parties shall
survive the Effective Time or, in the case of the Company, shall survive the
acceptance of, and payment for, any Shares by the Offeror pursuant to the
Offer.
Conduct of Business. Under the Pre-Acquisition Agreement, the Company has
covenanted and agreed that, during the period from the date of the Pre-
Acquisition Agreement until the termination of the Pre-Acquisition Agreement,
except as otherwise contemplated by the Pre-Acquisition Agreement or to the
extent that the Offeror shall otherwise consent in writing:
(a) the business of the Company and its subsidiaries shall be conducted
only in, and the Company and its subsidiaries shall not take any action
except in, the usual and ordinary course of business and consistent
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with past practice, and the Company shall use all commercially reasonable
efforts to maintain and preserve its and its subsidiaries' business
organization, assets, employees and advantageous business relationships;
(b) the Company shall not directly or indirectly do or permit to occur
any of the following: (i) amend the Company's governing documents; (ii)
declare, set aside or pay any dividend or other distribution or payment
(whether in cash, Shares or property) in respect of its share capital;
(iii) issue, grant, sell or pledge or agree to issue, grant, sell or pledge
any Shares of the Company or its subsidiaries, or securities convertible
into or exchangeable or exercisable for, or otherwise evidencing a right to
acquire, Shares of the Company or its subsidiaries, other than Shares
issuable pursuant to the terms of Company Options outstanding on the date
of the Pre-Acquisition Agreement; (iv) redeem, purchase or otherwise
acquire any of its outstanding Shares or other securities; (v) split,
combine or reclassify any of its Shares; (vi) adopt a plan of liquidation
or resolutions providing for the liquidation, dissolution, merger,
consolidation or reorganization of the Company or any of its subsidiaries;
or (vii) enter into or modify any contract, agreement, commitment or
arrangement with respect to any of the foregoing, except as permitted
above;
(c) other than pursuant to commitments entered into prior to the date of
the Pre-Acquisition Agreement, neither the Company nor any of its
subsidiaries shall directly or indirectly: (i) sell, pledge, dispose of or
encumber any assets except in the ordinary course of business; (ii) acquire
(by merger, amalgamation, consolidation or acquisition of shares or assets)
any corporation, partnership or other business organization or division
thereof, or, except for investments in securities made in the ordinary
course of business, make any investment either by purchase of shares or
securities, contributions of capital (other than to subsidiaries), property
transfer, or, except in the ordinary course of business, purchase of any
property or assets of any other individual or entity; (iii) incur any
indebtedness for borrowed money or any other material liability or
obligation or issue any debt securities or assume, guarantee, endorse or
otherwise as an accommodation become responsible for, the obligations of
any other individual or entity, or make any loans or advances, except in
the ordinary course of business; (iv) except for the Officer Obligations
(defined in the Pre-Acquisition Agreement as existing written obligations
or liabilities of the Company or any of its subsidiaries to pay any amount
to its officers, directors or employees, other than for salary, bonuses
under their existing bonus arrangements and directors' fees in the ordinary
course and, without limiting the generality of the foregoing, shall include
the obligations of the Company or any of its subsidiaries to officers or
employees (1) for severance or termination payments on the change of
control of the Company pursuant to any executive involuntary severance and
termination agreements in the case of officers and pursuant to the
Company's severance policy in the case of employees, and (2) for retention
bonus payments pursuant to any retention bonus program), pay, discharge or
satisfy any material claims, liabilities or obligations other than the
payment, discharge or satisfaction in the ordinary course of business
consistent with past practice of liabilities reflected or reserved against
in its financial statements or incurred in the ordinary course of business
consistent with past practice; (v) authorize, recommend or propose any
release or relinquishment of any material contract right other than in the
ordinary course of business consistent with past practice; (vi) waive,
release, grant or transfer any rights of material value or modify or change
in any material respect any existing material license, lease, contract,
production sharing agreement, government land concession or other document,
other than in the ordinary course of business consistent with past
practice; (vii) enter into any interest rate swaps, currency swaps or any
other rate fixing agreement for a financial transaction or enter into any
call arrangement of any sort or any forward sale agreement for commodities,
other than in the ordinary course of business consistent with past
practice; (viii) authorize or propose any of the foregoing, or enter into
or modify any contract, agreement, commitment or arrangement to do any of
the foregoing; or (ix) make any capital expenditures other than in
accordance with the 1999 capital expenditure budget previously disclosed in
writing to UTC;
(d) neither the Company nor any of its subsidiaries shall create any new
Officer Obligations and, except for payment of the existing Officer
Obligations, neither the Company nor any of its subsidiaries shall grant to
any officer or director an increase in compensation in any form, grant any
general salary increase other than in accordance with the requirements of
any existing collective bargaining or union contracts, grant to any other
employee any increase in compensation in any form other than routine
increases in the
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ordinary course of business consistent with past practices, make any loan
to any officer or director, or take any action with respect to the grant of
any severance or termination pay arising from the Offer or a change of
control of the Company or the entering into of any employment agreement
with, any senior officer or director, or with respect to any increase of
benefits payable under its current severance or termination pay policies;
(e) neither the Company nor any of its subsidiaries shall adopt or amend
or make any contribution to any bonus, profit sharing, option, pension,
retirement, deferred compensation, insurance, incentive compensation, other
compensation or other similar plan, agreement, trust, fund or arrangements
for the benefit of employees, except as is necessary to comply with the law
or as required by existing provisions of any such plans, programs,
arrangements or agreements; and
(f) the Company shall use its reasonable efforts to cause its current
insurance (or re-insurance) policies not be cancelled or terminated or any
of the coverage thereunder to lapse, unless simultaneously with such
termination, cancellation or lapse, replacement policies underwritten by
insurance and re-insurance companies of nationally recognized standing
providing coverage equal to or greater than the coverage under the
cancelled, terminated or lapsed policies for substantially similar premiums
are in full force and effect.
Shareholders Meeting for Second Stage Transaction; Information Circular. The
Pre-Acquisition Agreement provides that if any Second Stage Transaction
requires the approval of the Company's shareholders (the "Company Shareholder
Approval"), the Company will, as soon as practicable and in accordance with
the Securities Laws, other applicable Canadian laws, the Governing Documents
and the requirements of The Toronto Stock Exchange and the American Stock
Exchange or any other regulatory authority having jurisdiction, duly call,
give notice of, convene and hold a meeting of its shareholders (the
"Shareholders Meeting") to consider and vote upon the Second Stage
Transaction.
The Pre-Acquisition Agreement provides that if a Shareholders Meeting is
required, the Company will mail to its shareholders an Information Circular
(which shall include such proxy or other required informational statement or
circular, as the case may be, and all related materials at the time required
to be mailed to the Company's shareholders and all amendments or supplements
thereto, if any) with respect to the Shareholders Meeting.
No Solicitation; Directors' Recommendation. Pursuant to the Pre-Acquisition
Agreement, the Company has agreed to immediately cease and cause to be
terminated all existing discussions and negotiations, if any, with any parties
conducted before the date of the Pre-Acquisition Agreement with respect to any
Take-over Proposal (as defined below) and, without limitation, shall promptly,
following the execution of the Pre-Acquisition Agreement, request the return
of all confidential information provided by the Company to all parties who
have had such discussions or negotiations or who have entered into
confidentiality agreements with the Company pertaining to the sale of the
Company or a substantial portion of its assets.
The Pre-Acquisition Agreement provides that neither the Company nor any of
its subsidiaries, nor any of their respective directors, officers, employees,
agents, financial advisors, counsel or other representatives shall, directly
or indirectly, (i) solicit, initiate or encourage, or enter into any
agreements or understandings with respect to, any Take-over Proposal (as
defined below) (other than from UTC and its subsidiaries and their respective
directors, officers, employees, agents, financial advisors, counsel or other
representatives) or (ii) provide any confidential information to any person or
entity (other than UTC and its affiliates) or (iii) participate in any
discussions or negotiations relating to any such Take-over Proposal.
Notwithstanding the foregoing, if a party that has proposed a Take-over
Proposal (as defined below) that the Board determines is reasonably likely to
lead to a Superior Take-over Proposal has requested confidential information,
the Board, subject to its fiduciary obligations and entering into a suitable
confidentiality agreement with such party, may provide to such party the same
information as has been provided to UTC and may consider and negotiate a
Superior Take-over Proposal. Neither the Company nor the Board, however, may
approve, make a recommendation to the Company's shareholders or enter into an
agreement with respect to a Superior Take-over Proposal unless the Pre-
Acquisition
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Agreement has been previously terminated. The Company also is prohibited from
waiving the "standstill" provisions applicable to any confidentiality
agreement to which it is a party (except with respect to UTC).
For purposes of the Pre-Acquisition Agreement, "Take-over Proposal" means,
in respect of the Company or its subsidiaries or their assets, any proposal or
offer regarding any take-over bid, merger, consolidation, amalgamation,
arrangement, sale of a material amount of assets, sale of treasury shares
(other than pursuant to options under the Stock Option Plans) or other
business combination or similar transaction. "Superior Take-over Proposal"
means any written unsolicited Take-over Proposal (i) which, in the opinion of
the Board, after consulting with and receipt of advice from its independent
financial advisor, is more favorable to the Company's shareholders from a
financial point of view than the Offer (including, and after considering, any
adjustment to the terms and conditions proposed by UTC and Offeror in response
to such Take-over Proposal), and (if such Take-over Proposal includes cash as
consideration) that sufficient financing commitments have been obtained with
respect to such Take-over Proposal that it reasonably expects a transaction
pursuant to such proposal could be consummated and that such transaction is
reasonably capable of being consummated without material delay taking into
account all legal, accounting, regulatory and other aspects of such Take-over
Proposal; and (ii) with respect to which UTC has received a copy of such Take-
over Proposal as executed by the party making the proposal, at least 48 hours
prior to acceptance or recommendation of such proposal by the Board.
Pursuant to the Pre-Acquisition Agreement, the Board has agreed, subject to
its fiduciary obligations and certain other conditions set forth below, to
recommend acceptance of the Offer by the Company's shareholders, provided that
the Offer is not amended except in accordance with the terms of the Pre-
Acquisition Agreement. On the date the Offer Documents are filed with the
appropriate Securities Authorities, the Company has agreed to file a
directors' circular with respect to the Offer which shall comply in all
material respects with the requirements of applicable Securities Laws and
which shall contain the recommendation of acceptance of the Offer, as well as
notification of the intention of the directors of the Company to tender their
Shares pursuant to the Offer, and shall mail the directors' circular to the
Company's shareholders. The Company agreed to provide UTC with any comments
the Company or its counsel may receive from the Securities Authorities with
respect to such directors' circular promptly after the receipt of such
comments.
The Pre-Acquisition Agreement provides that, in the event that a Superior
Take-over Proposal is offered or made to the Company's shareholders or to the
Company prior to the expiration of the Offer, the Board may withdraw, modify
or change any recommendation regarding the Offer if the Board, acting in good
faith, after consulting outside counsel, determines that the directors are
required to do so in order to discharge properly their fiduciary duties under
applicable law.
Regulatory Filings. In the Pre-Acquisition Agreement, the parties have
agreed to (i) promptly take all actions necessary to make the filings required
of UTC, the Offeror, the Company or any of their affiliates under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR"), and the
Competition Act (Canada), as amended, and any other similar statutes in other
jurisdictions, (ii) comply at the earliest practicable date with any request
for additional information or documentary material received by any of the
parties and their affiliates from the U.S. Department of Justice pursuant to
HSR or from the Canadian Competition Bureau pursuant to the Competition Act
(Canada), as amended, or any other governmental authority, as the case may be,
(iii) consult and cooperate in connection with any investigation or other
inquiry concerning the transactions contemplated by the Pre-Acquisition
Agreement commenced by the U.S. Federal Trade Commission (the "FTC") or the
Antitrust Division of the U.S. Department of Justice (the "Antitrust
Division") or state attorneys general or by the Canadian Competition Bureau,
as the case may be, (iv) as promptly as practicable, make any necessary
filings under the Investment Canada Act, as amended or any other governmental
authority; (v) as promptly as possible, prepare and file any filings required
under Securities Laws, the rules of The Toronto Stock Exchange and the
American Stock Exchange, or any other applicable law relating to the
transactions contemplated by the Pre-Acquisition Agreement.
Pursuant to the Pre-Acquisition Agreement, the parties have agreed to
promptly inform the other parties of any material communication received by
such party from the FTC, the Antitrust Division, the Canadian
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Competition Bureau or any other governmental authority regarding any of the
transactions contemplated by the Pre-Acquisition Agreement. In addition, UTC
and the Offeror have agreed to advise the Company promptly of any
understandings, undertakings or agreements which such parties propose to make
or enter into with the FTC, the Antitrust Division, the Canadian Competition
Bureau or any other governmental authority in connection with the transactions
contemplated by the Pre-Acquisition Agreement.
Debt Obligations. In the Pre-Acquisition Agreement, the Company has agreed
to use reasonable efforts to cooperate and assist UTC in obtaining consents to
modifications and in purchasing certain of the Company's outstanding debt
obligations, including the conduct of (or provision of assistance to UTC in
conducting) a consent solicitation and tender offer for the outstanding debt
securities of the Company or its subsidiaries on terms satisfactory to UTC;
provided that (i) the Company shall not be required to purchase any debt
obligations or pay any fees in connection with such efforts prior to
consummation of any Second Stage Transaction, unless funds therefor are
provided by UTC on terms satisfactory to the Company and (ii) UTC shall pay or
reimburse the Company for all reasonable expenses in connection therewith. The
Company also represented that, as of the date of the Pre-Acquisition
Agreement, the Company was able to incur at least $1.00 of additional
Indebtedness under certain of its existing debt instruments. The Company is
advised that UTC or its affiliates intend to make a tender offer/consent
solicitation for certain of the Company's outstanding debt obligations that
will be contingent upon consummation of the transactions contemplated by the
Pre-Acquisition Agreement.
Compensation; Benefit Plans. Pursuant to the Pre-Acquisition Agreement,
except as otherwise agreed with a relevant employee, UTC and the Offeror
agree, and after the Effective Time will cause the Company and any successor
thereto to agree to maintain until December 31, 1999 salaries and all benefit
plans and compensation programs currently available to employees of the
Company or any of its subsidiaries, including without limitation members of
management of the Company or any of its subsidiaries, or to make available
until December 31, 1999 alternative benefit plans and compensation programs
which are comparable in the aggregate to those currently available to such
employees. For these purposes, "benefit plans" means all arrangements,
agreements, programs or policies, whether funded or unfunded, relating to
employees to which the Company or any of its subsidiaries is a party or by
which it is bound and under which the Company or any of its subsidiaries have
any liability or contingent liability and relating to: (i) retirement savings
or pensions, including any defined benefit pension plan, defined contribution
plan, group registered retirement savings plan, thrift and saving plan or
supplemental pension or retirement plan; (ii) employee welfare benefits, as
defined for purposes of Section 3(1) of the Employee Retirement Income
Security Act of 1974 (United States), as amended, including hospitalization,
health, disability, life or severance pay benefits; and (iii) profit sharing,
bonus, stock incentive, stock purchase and other incentive plans or programs.
Indemnification. The Pre-Acquisition Agreement provides that if UTC acquires
the Shares under the Offer, UTC shall cause the Company to fulfill its
obligations pursuant to indemnities provided or available to past and present
officers and directors of the Company pursuant to the provisions of the
Company's governing documents, the Canada Business Corporations Act, as
amended (the "Canada BCA"), and the written indemnity agreements entered into
between the Company and its officers and directors.
Pursuant to the Pre-Acquisition Agreement, the Offeror has agreed to use
reasonable efforts to secure directors' and officers' liability insurance
coverage for the Company's current and former directors and officers on a six
year "trailing" or "runoff" basis from and after the Effective Time. If a
"trailing" policy is not available, then the Offeror has agreed that for the
entire period from the Effective Time until six years after the Effective
Time, the Offeror will use reasonable efforts to cause the Company or any
successor thereto to maintain the Company's current directors' and officers'
insurance policy or an equivalent policy, subject in either case to terms and
conditions no less advantageous to the directors and officers of the Company
than those contained in the policy in effect on the date of the Pre-
Acquisition Agreement, for all present and former directors and officers of
the Company, covering claims made prior to or within six years after the
Effective Time. The Offeror, however, shall not be required to pay an annual
premium in excess of 200% of the aggregate annual amounts currently paid by
the Company to maintain the existing policies (the "Insurance Amount") and, if
equivalent coverage cannot be obtained, or can be obtained only by paying an
annual premium in excess of such amount,
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Offeror shall use its reasonable best efforts to obtain as much comparable
insurance as is available for the Insurance Amount.
Termination. The Pre-Acquisition Agreement may be terminated upon written
notice at any time prior to the completion of the transactions contemplated
thereby:
(a) by mutual written consent of UTC and the Company;
(b) by either UTC or the Company (provided that the terminating party is
not then in breach, in any material respect, of any covenant or other
agreement contained in the Pre-Acquisition Agreement and no representation
or warranty of such terminating party contained in the Pre-Acquisition
Agreement that is qualified as to materiality shall be untrue or incorrect,
and no representation or warranty of such terminating party contained in
the Pre-Acquisition Agreement that is not so qualified shall be untrue or
incorrect in any material respect, at any time before the Effective Time,
in each case, as if made at and as of such time (or, to the extent such
representation or warranty speaks as of a specific date, no such
representation or warranty was so untrue or incorrect as of such date)), if
there shall have been a breach, in any material respect, of any covenant or
other agreement contained in the Pre-Acquisition Agreement on the part of
the other party or if any representation or warranty of such other party
contained in the Pre-Acquisition Agreement that is qualified as to
materiality shall not be true and correct, or any representation or
warranty of such other party contained in the Pre-Acquisition Agreement
that is not so qualified shall not be true and correct in all material
respects, at any time before the Effective Time, in each case as if made at
and as of such time (or, to the extent such representation or warranty
speaks as of a specific date, such representation or warranty was not so
true and correct as of such date), which breach or misrepresentation is not
cured within 10 days following written notice to such other party, or such
breach, by its nature or timing cannot be cured prior to the expiration of
the Offer;
(c) by the Company, following receipt of, and in order to accept or
recommend, a Superior Take-over Proposal if, after consulting with outside
counsel, the Board has determined that such action is required in order to
discharge properly the directors' fiduciary duties under applicable law;
(d) by UTC, if (i) the Board or any committee thereof modifies or amends
in any manner adverse to UTC or Offeror, or withdraws, its authorization,
approval or recommendation of the Offer or the Pre-Acquisition Agreement or
shall have resolved to do any of the foregoing or (ii) the Company or any
of its subsidiaries (or the Board or any committee thereof) shall have
approved, recommended, authorized, proposed or filed a document with any
Securities Authority not opposing, or publicly announced its intention to
enter into any Take-over Proposal (other than with UTC, Offeror or any of
their affiliates), or shall have resolved to do any of the foregoing;
(e) by either UTC or the Company, if the Offer terminates or expires at
the Expiry Time, without the Offeror taking up and paying for any Shares on
account of the failure of any of the Offer Conditions which has not been
waived by Offeror, unless the absence of such occurrence shall be due to
the failure of the party seeking to terminate the Pre-Acquisition Agreement
to perform its requisite obligations hereunder; or
(f) by either UTC or the Company, if the date that Offeror first takes up
and acquires Shares pursuant to the Offer (the "Take-up Date") has not
occurred on or prior to December 15, 1999.
In the event of a termination of the Pre-Acquisition Agreement by either the
Company or UTC as provided under "--Termination", the Pre-Acquisition
Agreement shall forthwith have no further force or effect and there shall be
no obligation on the part of UTC, the Offeror or the Company thereunder,
except (A) UTC shall be obligated to reimburse the Company for certain
expenses that it may have incurred in connection with repurchasing debt
obligations of the Company, (B) if the Pre-Acquisition Agreement is terminated
pursuant to subsections (c) or (d) described under "--Termination" above, the
Company is required to pay UTC $15 million either concurrently (in the case of
a termination under subsection (c)) or within two business days after the
termination (in the case of a termination under (d)), and (C) if the Pre-
Acquisition Agreement is terminated pursuant to subsections (e) or (f)
described under "--Termination" above, principally as a result of the failure
to obtain
11
<PAGE>
antitrust approvals contemplated under clause (b) of the Offer Conditions (See
"--Certain Conditions of the Offer" below), UTC shall pay the Company $10
million unless the Company has breached certain covenants in the Pre-
Acquisition Agreement.
In addition, the Pre-Acquisition Agreement provides that if a Take-over
Proposal is announced publicly while the Offer is open for acceptance and the
minimum acceptance condition contemplated under clause (a) of the Offer
Conditions is not satisfied at the expiration of the Offer (other than
principally as a result of a failure to obtain antitrust approvals), then,
within two business days after such expiration, the Company shall pay UTC a
fee in the amount of $15 million. In the event a Take-over Proposal is
announced publicly and made after the expiration of the Offer but prior to
March 31, 2000, then, if Offeror did not take up and pay for any Shares under
the Offer, and the Company was not entitled to any payment from UTC because of
a failure to obtain antitrust approvals, the Company, within two business days
after such Take-over Proposal is made, shall pay to UTC a fee in the amount of
$15 million.
Extension; Waiver. The Pre-Acquisition Agreement provides that UTC and the
Offeror, on the one hand, and the Company, on the other hand, may (i) extend
the time for the performance of any of the obligations or other acts of the
other, (ii) waive compliance with any of the other's agreements or the
fulfillment of any conditions to its own obligations contained in the Pre-
Acquisition Agreement, or (iii) waive inaccuracies in any of the other's
representations and warranties contained in the Pre-Acquisition Agreement or
in any document delivered pursuant thereto; provided, however, that any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
Amendment. The Pre-Acquisition Agreement provides that it may be amended by
mutual agreement between the parties thereto, by an instrument in writing
signed by the appropriate officers on behalf of each of the parties thereto.
Certain Conditions of the Offer. Notwithstanding any other term of the
Offer, the obligation of the Offeror to, and of UTC to cause the Offeror to,
commence the Offer, conduct and consummate the Offer and accept for payment
or, subject to any applicable rules and regulations of the Commission,
including Rule 14e-1(c) under the Exchange Act (relating to the Offeror's
obligation to pay for or return tendered Shares after the termination or
withdrawal of the Offer), to pay for, any Shares tendered (and not properly
withdrawn) pursuant to the Offer shall be subject only to the following Offer
Conditions:
(a) at the expiration of the Offer, the number of Shares that shall have
been validly deposited under the Offer (and not properly withdrawn),
together with any Shares held by or on behalf of UTC, or any of its
subsidiaries, shall constitute at least 71.0% of the outstanding Shares
(calculated on a diluted basis);
(b) all material requisite governmental and regulatory approvals and
consents (including, without limitation, those of any stock exchanges or
Securities Authorities) required in UTC's reasonable judgment to make
lawful the purchase by, or the sale to, the Offeror, of the Shares (whether
under the Offer, a compulsory acquisition or Second Stage Transaction)
shall have been obtained and all applicable statutory or regulatory waiting
periods during the pendency of which the purchase by, or the sale to,
Offeror of the Shares would be illegal shall have expired or been
terminated without the imposition of any conditions that, individually or
in the aggregate, have or are reasonably likely to have the consequences
referred to in clauses (i) through (iii) of paragraph (c) below; without
limiting the foregoing: (i) the applicable waiting periods under HSR and
the Competition Act with respect to the Offer shall have expired or been
terminated; (ii) the Offer shall have been approved or deemed to be
approved or exempted pursuant to the Investment Canada Act; and (iii) all
other consents and approvals without which in UTC's reasonable judgment the
purchase by, or the sale to, Offeror of the Shares (whether under the
Offer, a compulsory acquisition or Second Stage Transaction) would be
illegal have been obtained;
(c) no statute, rule, regulation, executive or other order shall have
been enacted, issued, promulgated or enforced by any governmental authority
and no preliminary or permanent injunction, temporary restraining order or
other legal restraint or prohibition shall have been threatened or issued
by (and no
12
<PAGE>
action, proceeding or counterclaim shall be pending or threatened by or
before) a court or other governmental authority (i) preventing or
rendering, or seeking to prevent or render, illegal the making of the
Offer, the acceptance for payment of, the payment for, or ownership,
directly or indirectly, of some or all of the Shares by Offeror or the
completion of a compulsory acquisition or Second Stage Transaction,
(ii) imposing or confirming, or seeking to impose or confirm, limitations
on the ability of UTC or Offeror, directly or indirectly, effectively to
acquire or hold or to exercise full rights of ownership of the Shares or
otherwise control the Company, in a manner that, in the reasonable judgment
of UTC, would reasonably be expected, in the aggregate, to materially
impair the overall benefits to be realized by UTC from consummation of the
Offer and the other transactions contemplated by the Pre-Acquisition
Agreement, or (iii) requiring, or seeking to require, divestiture by
Offeror, directly or indirectly, of any Shares or requiring Offeror, UTC,
the Company or any of their respective subsidiaries or affiliates to
dispose of or hold separate all or any portion of their respective
businesses, assets or properties or imposing any limitations on the ability
of any of such entities to conduct their respective businesses or own such
assets, properties or the Shares or on the ability of UTC or Offeror to
conduct the business of the Company and its subsidiaries and own the assets
and properties of the Company and its subsidiaries, in each case under this
clause (iii) in a manner that, in the reasonable judgment of UTC, would
reasonably be expected, in the aggregate, to materially impair the overall
benefits to be realized by UTC from consummation of the Offer and the other
transactions contemplated by the Pre-Acquisition Agreement;
(d) (i) the Company shall not have breached, or failed to comply with, in
any material respect, any of its covenants or other obligations under the
Pre-Acquisition Agreement, and (ii) each of the representations and
warranties of the Company contained in the Pre-Acquisition Agreement that
is qualified as to materiality shall be true and correct and any such
representation or warranty that is not so qualified shall be true and
correct, in all material respects, as of the date of the Pre-Acquisition
Agreement and as of the expiration of the Offer as if made on and as of the
expiration of the Offer (except to the extent such representations and
warranties speak as of a specific date, which shall be so true and correct
as of such date); provided that in either case the Company has been given
notice of and ten (10) business days to cure any such misrepresentation,
breach or non-performance or such misrepresentation, breach or non-
performance by its timing or nature cannot be cured before such tenth
business day;
(e) at any time after the date of the Pre-Acquisition Agreement, there
shall not have occurred any event, occurrence, development or state of
circumstances that has had any effect on the business, operations, results
of operations or financial condition of the Company or any of its
subsidiaries that, individually or in the aggregate, is materially adverse
to the business of the Company and its subsidiaries considered as a whole,
other than any such effect (i) which arises out of a matter that has been
publicly disclosed prior to the date of the Pre-Acquisition Agreement or
otherwise disclosed to UTC in the disclosure schedule to the Pre-
Acquisition Agreement, (ii) resulting from conditions affecting the
residential and light commercial air conditioning and heating product
industries in Canada and the United States, (iii) resulting from general
economic, financial, currency exchange, securities or commodity market
conditions in Canada, the United States or elsewhere or (iv) resulting
solely from the public announcement of the transactions contemplated by the
Pre-Acquisition Agreement;
(f) there shall not have occurred, developed or come into effect or
existence any event, action, state, condition or major financial occurrence
of national or international consequence or any law, regulation, action,
governmental regulation, inquiry or other occurrence of any nature
whatsoever which, in the reasonable judgment of UTC, materially adversely
affects or involves, the general economic, financial, currency exchange,
securities or commodity market operations in Canada or the United States;
(g) neither the Company nor any of its subsidiaries (or the Board or any
committee thereof) shall have approved, recommended, authorized, proposed,
filed a document with any Securities Authorities not opposing, or publicly
announced its intention to enter into, any Take-over Proposal (other than
with Offeror or any of its affiliates) and shall not have resolved to do
any of the foregoing;
(h) the Pre-Acquisition Agreement shall not have been terminated pursuant
to its terms; and
13
<PAGE>
(i) the Board or any committee thereof shall not have modified or amended
in any manner adverse to UTC or Offeror, and shall not have withdrawn, its
authorization, approval or recommendation of the Offer or this Agreement
and shall not have resolved to do any of the foregoing.
The Shareholder Agreements
On June 23, 1999 and concurrently with the execution of the Pre-Acquisition
Agreement, the Offeror entered into Shareholder Agreements with each of Ravine
Partners and Ontario Teachers. Richard W. Snyder, the Chairman of the Board,
is the general partner of Ravine Partners and Roy T. Graydon, a director of
the Company, is an employee of Ontario Teachers.
Pursuant to the Shareholder Agreements, Ravine Partners has agreed to
validly tender and not withdraw 7,889,870 Shares (representing approximately
19.34% of the outstanding Shares on an undiluted basis) and Ontario Teachers
has agreed to validly tender and not withdraw 7,919,638 Shares (representing
approximately 19.42% of the outstanding Shares on an undiluted basis), unless
(in the case of Ontario Teachers only) a Superior Take-over Proposal is made.
In addition, Ravine Partners has granted the Offeror an option to purchase its
Shares at a price of $11.75 per Share (or any greater amount per Share paid in
the Offer). Such option is exercisable in certain circumstances following
termination of the Pre-Acquisition Agreement.
The option to acquire Ravine Partners' Shares is exercisable if (a) the Pre-
Acquisition Agreement is terminated (i) by the Company because the Company has
received a Superior Take-over Proposal and the Board has determined that its
fiduciary duties require it to terminate the Pre-Acquisition Agreement, or
(ii) by UTC because (A) the Board or any committee thereof has modified in any
manner adverse to UTC or the Offeror or withdrawn its approval or
recommendation of the Offer or (B) the Company has publicly announced its
intention to enter into a business combination with any person other than UTC
or the Offeror or taken other public actions not opposing any Take-over
Proposal (other than with UTC or the Offeror); (b) a Take-over Proposal with
respect to the Company is announced by a person other than UTC or the Offeror
while the Offer is open and the minimum acceptance condition contemplated
under subsection (a) described under "--Certain Conditions of the Offer" is
not satisfied (other than principally as a result of a failure to obtain
antitrust approvals); or (c) a Take-over Proposal with respect to the Company
is announced by a person other than UTC or the Offeror after the Offer has
closed but prior to March 31, 2000 and the Offeror did not consummate the
Offer (other than principally as a result of a failure to obtain antitrust
approvals).
If the Offeror acquires Ravine Partners' Shares by exercising its option and
then sells such Shares to a buyer in connection with any Take-over Proposal
within 12 months of the Closing, Ravine Partners is entitled to receive 75% of
the excess of the aggregate proceeds received by the Offeror in such sale over
the aggregate price the Offeror paid in exercising the option for those
Shares.
The Shareholder Agreements also contain covenants by Ravine Partners and
Ontario Teachers not to take any action to solicit, initiate or encourage
inquiries, proposals or offers from, or provide information to any other
person relating to the direct or indirect acquisition or disposition of any
securities of the Company or its subsidiaries. Each of Ravine Partners and
Ontario Teachers further covenants not to cooperate or participate in any
amalgamation, merger or other business combination of the Company or its
subsidiaries and not to dispose of any of their Shares, except in accordance
with the applicable Shareholder Agreement.
The Shareholder Agreements further contain a covenant by Ravine Partners and
Ontario Teachers to use all reasonable efforts to cause their associates who
serve directors of the Company to resign as the Offeror requests after the
Offeror acquires the Shares under the Offer. Currently, two Board members, one
of whom is the Chairman of the Board, are designees of Ravine Partners and
Ontario Teachers.
In the case of the Shareholder Agreement with Ravine Partners, if the option
is not exercised then from and after the date when the option ceases to be
exercisable, the Shareholder Agreement terminates. Ontario Teachers may
terminate its Shareholder Agreement at the earlier of (i) a third party's
making a bona fide offer that
14
<PAGE>
constitutes a Superior Take-over Proposal; (ii) termination of the Pre-
Acquisition Agreement; and (iii) December 15, 1999.
BOARD OF DIRECTORS OF THE COMPANY
The members of the Board of ICP are Richard C. Barnett, Stanley M. Beck, Q.C.,
W. Michael Clevy, The Honourable William G. Davis, P.C., C.C., Q.C., John F.
Fraser, O.C., Roy T. Graydon, Marvin G. Marshall, Ernest C. Mercier, David H.
Morris, David A. Rattee, Richard W. Snyder and William A. Wilson.
15
<PAGE>
OWNERSHIP OF SHARES OF THE COMPANY BY DIRECTORS AND SENIOR OFFICERS
The following table sets forth the number and percentage of Shares
(excluding stock options) owned, or over which control or direction is
exercised, by each director and senior officer of the Company and by each
associate thereof. The number of Shares (excluding those issuable upon the
exercise of outstanding stock options) owned by the following directors and
senior officers of the Company aggregates 16,531,528, representing
approximately 40.53% of the outstanding Shares on an undiluted basis. Other
than an aggregate 270,000 Shares held by the International Comfort Products
Corporation (USA) Retirement Plan for Hourly Employees and the International
Comfort Products Corporation (USA) Retirement Plan for Salaried Employees, no
securities of the Company are owned, directly or indirectly, or controlled by
any person acting jointly or in concert with the Company.
<TABLE>
<CAPTION>
Number and Percentage of
Shares Owned or Over Which
Directors Position with the Company Control or Direction is Exercised
--------- ------------------------- --------------------------------------
<S> <C> <C> <C>
Richard C. Barnett...... Director 3,389 Less than 1%
Stanley M. Beck, Q.C.... Director 2,723 Less than 1%
W. Michael Clevy........ President, Chief Executive 32,075 Less than 1%
Officer and Director
The Honourable William
G. Davis, P.C., C.C.,
Q.C.................... Director 2,337 Less than 1%
John F. Fraser, O.C..... Director 5,171 Less than 1%
Roy T. Graydon.......... Director 7,919,638(1) 19.42%
Marvin G. Marshall...... Director 18,183 Less than 1%
Ernest C. Mercier....... Director 9,800 Less than 1%
David H. Morris......... Director 3,585 Less than 1%
David A. Rattee......... Director 21,568(2) Less than 1%
Richard W. Snyder....... Chairman of the Board 8,304,111(3) 20.36%
William A. Wilson....... Director 11,634 Less than 1%
<CAPTION>
Senior Officers
---------------
<S> <C> <C> <C>
David P. Cain........... Senior Vice President, General 28,192 Less than 1%
Counsel and Secretary
Stephen L. Clanton...... Senior Vice President, Chief 13,671 Less than 1%
Financial Officer and Treasurer
Douglas K. Gibbs........ Senior Vice President, Canadian 10,000 Less than 1%
Distributions and Operations
Francis C. Harrell...... Senior Vice President, Business 27,819 Less than 1%
Development
Robert C. Henningsen.... Senior Vice President, Human 8,119 Less than 1%
Resources and Administration
Herman V. Kling......... Senior Vice President, Sales 1,995 Less than 1%
and Marketing
Augusto H. Millan....... Senior Vice President, 28,884 Less than 1%
International and Aftermarket
David B. Schumacher..... Vice President, Commercial 8,924 Less than 1%
Products Group
Karla G. Smith.......... Vice President, Corporate 8,412(4) Less than 1%
Communications
James R. Wiese.......... Senior Vice President, 61,298 Less than 1%
Residential Products Group
</TABLE>
- --------
(1) Includes 7,916,638 Shares owned by Ontario Teachers, of which Mr. Graydon
is an employee. Mr. Graydon disclaims any beneficial interest in the
Shares owned by Ontario Teachers.
(2) Includes 6,125 Shares owned by Mr. Rattee's spouse.
(3) Includes 7,889,870 Shares owned by Ravine Partners, of which Mr. Snyder is
the general partner.
(4) Includes 1,762 Shares owned by Ms. Smith's spouse.
16
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES OF THE COMPANY
To the knowledge of the Board, after reasonable inquiry, no person or
company beneficially owns or exercises control or direction over or holds more
than 10% of the Shares on an undiluted basis, other than as set forth below:
<TABLE>
<CAPTION>
Number of Shares Owned
or Over Which Control
or Direction is Percentage of
Name and Address of Beneficial Owner Exercised Outstanding Shares
- ------------------------------------ ---------------------- ------------------
<S> <C> <C>
Ravine Partners, Ltd. .............. 8,304,111(1) 20.36%
3219 McKinney Avenue
Dallas, Texas 75204
Ontario Teachers' Pension Plan Board
................................... 7,919,638(2) 19.42%
5650 Yonge Street, 5th Floor
North York, Ontario M2M 4H5
</TABLE>
- --------
(1) Includes 414,241 Shares owned by Richard W. Snyder, the Chairman of the
Board, who is the general partner of Ravine Partners.
(2) Includes 3,000 Shares owned by Roy T. Graydon, a director of the Company,
who is an employee of Ontario Teachers.
ACCEPTANCE OF OFFER
Ravine Partners, of which Richard W. Snyder, the Chairman of the Board, is
the general partner, has agreed to deposit the 7,889,870 Shares owned by them
under the Offer. Ontario Teachers, of which Roy T. Graydon, a director of the
Company, is an employee, has agreed to deposit 7,919,638 Shares under the
Offer. See "Agreements with United Technologies Corporation and the Offeror".
In addition, to the knowledge of the Board, each of the directors and nine
of the eleven senior officers of ICP and their respective associates who own
Shares currently intend to deposit under the Offer all Shares owned by them,
and, to the extent that any senior officers who hold options to purchase
Shares opt to exercise such options prior to the expiry of the Offer, to the
knowledge of the Board nine of the eleven senior officers currently intend to
deposit to the Offer all Shares acquired on any such exercise. The remaining
two senior officers have not yet formed an intention with respect to the
deposit of their Shares.
TRADING IN SHARES OF THE COMPANY
During the six months preceding the date hereof, none of the Company, the
directors or senior officers of the Company or, to the knowledge of the Board,
after reasonable inquiry, any associates of the directors or senior officers
of the Company, any person or company who beneficially owns, exercises control
or direction over or holds more than 10% of the Shares (except that no
representation is made or knowledge expressed with respect to Ontario
Teachers) or any person or company acting jointly or in concert with the
Company, has traded any securities of the Company, except as noted below:
<TABLE>
<CAPTION>
Shares Price Per
Nature of Traded Share
Name Trade Date of Trade (#) ($)
---- --------- ------------- ------ ---------
<S> <C> <C> <C> <C>
ICP.............................. bought (1) December 30, 1998 5,000 6.75
December 31, 1998 1,000 7.25
January 4, 1999 50,000 7.50
January 5, 1999 5,000 7.63
January, 6, 1999 5,000 7.63
254,100 7.00
January 7, 1999 5,000 7.35
Francis C. Harrell............... sold June 25, 1999 8,000 11.38
</TABLE>
- --------
(1) The Shares were purchased by the Company pursuant to a stock repurchase
program commenced on September 28, 1998. Under such program, stock
repurchases are made at management's discretion through open market
purchases on the TSE and the Amex, in accordance with the rules of such
exchanges. All purchases of Shares were made on the Amex.
17
<PAGE>
During the two years preceding the date hereof, the Company did not issue
any Shares or any securities convertible into Shares to its directors or
senior officers, except as noted below:
Grant of Options
The following options to acquire Shares were granted under the Company's
Stock Option Plans on the following dates:
<TABLE>
<CAPTION>
Shares Under Exercise Price
Option Granted Per Share
Name Date of Grant (#) (Cdn. $)
---- --------------- -------------- --------------
<S> <C> <C> <C>
Stephen L. Clanton........... April 27, 1998 25,000 15.30
Douglas K. Gibbs............. April 27, 1998 25,000 15.30
August 11, 1998 75,000 16.00
Herman V. Kling.............. April 27, 1998 25,000 15.30
David B. Schumacher.......... August 11, 1998 75,000 16.00
Karla G. Smith............... August 11, 1998 50,000 16.00
</TABLE>
Share Purchase Plan
The following Shares were issued under the Company's Share Ownership Savings
Plan during the period July 1, 1997 to June 30, 1999:
<TABLE>
<CAPTION>
Number of Average Price
Shares Per Share
Name (#) ($)
---- --------- -------------
<S> <C> <C>
David P. Cain...................................... 2,922 8.10
Stephen L. Clanton................................. 671 8.11
W. Michael Clevy................................... 2,571 8.10
Francis C. Harrell................................. 2,870 8.10
Robert C. Henningsen............................... 2,889 8.10
Herman V. Kling.................................... 1,995 8.27
Augusto H. Millan.................................. 2,938 8.10
David B. Schumacher................................ 984 8.12
Karla G. Smith..................................... 826 8.11
James R. Wiese..................................... 2,893 8.10
</TABLE>
Directors' Share Compensation Arrangement
The following Shares were issued under the Company's Directors' Share
Compensation Arrangement during the period July 1, 1997 to June 30, 1999:
<TABLE>
<CAPTION>
Number of Average Price
Shares Per Share
Name (#) ($)
---- --------- --------------
<S> <C> <C>
Richard C. Barnett............................ 2,889 8.13
Stanley M. Beck, Q.C.......................... 1,670 7.74
The Honourable William G. Davis, P.C., C.C.,
Q.C.......................................... 1,209 7.73
John F. Fraser, O.C........................... 3,197 7.57
Roy T. Graydon................................ 7,638(1) 8.06
Marvin G. Marshall............................ 3,183 8.35
Ernest C. Mercier............................. 3,858 7.61
David H. Morris............................... 2,209 7.83
David A. Rattee............................... 1,257 7.81
Richard W. Snyder............................. 17,854 8.29
William A. Wilson............................. 3,831 7.68
</TABLE>
- --------
(1) The 7,638 Shares were issued to Ontario Teachers, of which Mr. Graydon is
an employee.
18
<PAGE>
OWNERSHIP OF SECURITIES OF UNITED TECHNOLOGIES CORPORATION
Except as described below, none of the Company, the directors or senior
officers of the Company, any associates of the directors or senior officers of
the Company or, to the knowledge of the Board, after reasonable inquiry, any
person or company beneficially owning, exercising control or direction over or
holding more than 10% of the Shares (except that no representation is made or
knowledge expressed with respect to Ontario Teachers) or any person or company
acting jointly or in concert with the Company, owns or exercises control or
direction over any securities of UTC or the Offeror.
Messrs. Clevy, Gibbs, Millan and Wiese, senior officers of the Company,
beneficially own approximately 3,247, 2,200, 2,498 and 1,982 shares of common
stock of UTC, respectively.
RELATIONSHIP BETWEEN UNITED TECHNOLOGIES CORPORATION
AND THE DIRECTORS AND SENIOR OFFICERS OF THE COMPANY
None of the directors or senior officers of the Company are directors or
senior officers of UTC or any subsidiary of UTC, including the Offeror. Except
as described below, there are no arrangements or agreements made or currently
proposed to be made between UTC or the Offeror and any of the directors or
senior officers of the Company, including arrangements or agreements with
respect to compensation for loss of office or as to their remaining in or
retiring from office, if the Offer is consummated.
In the Pre-Acquisition Agreement, the Offeror has agreed, and after the
Effective Time (as defined therein) agreed to cause the Company and any
successor to the Company to agree, to honour and comply with the terms of any
existing executive termination and severance agreements, plans or policies of
the Company and its subsidiaries. UTC has also agreed that if it acquires
Shares under the Offer, it will cause the Company to fulfill its obligations
pursuant to indemnities provided or available to directors of the Company
pursuant to the provisions of the Company's by-laws, the Canada Business
Corporations Act and written indemnity agreements entered into between the
Company and such directors.
UTC has offered employment to each of Messrs. Kling, Schumacher and Wiese,
effective upon consummation of the Offer, on terms to be negotiated. Each of
these individuals has been offered a sign-on bonus of $100,000 and the
opportunity to convert certain severance benefits and stock awards. At this
time, no agreement has been reached with any of these individuals.
INTEREST OF DIRECTORS AND OFFICERS OF THE COMPANY IN
MATERIAL CONTRACTS OF UNITED TECHNOLOGIES CORPORATION
None of the directors or senior officers of the Company, any associates of
the directors or senior officers of the Company or, to the knowledge of the
Board, after reasonable inquiry, any person or company beneficially owning,
exercising control or direction over or holding more than 10% of the Shares,
has an interest in any material contract or transaction to which UTC or the
Offeror is a party.
AGREEMENTS BETWEEN THE COMPANY AND ITS DIRECTORS AND OFFICERS
Except as described below, there are no arrangements or agreements made or
currently proposed to be made between the Company and any of the directors or
senior officers of the Company, including arrangements or agreements with
respect to compensation for loss of office or as to their remaining in or
retiring from office, if the Offer is consummated. Except as described below,
there are no service contracts of directors and officers of the Company or any
of its affiliates with more than a 12 month period remaining.
19
<PAGE>
The Company has entered into contracts with each of the senior officers of
the Company that provide generally for continuation of the officer's salary
and benefits for a stated number of months following a change of control (the
"Severance Period") in the event of a termination of the officer's employment
other than "for cause" or as a result of death or disability. In addition, the
officer will receive, in such event, on an annual basis, during the Severance
Period, an amount equal to the average of the officer's bonus during the three
years prior to termination. For Mr. Clevy, the Severance Period is 36 months;
for Messrs. Cain, Clanton, Harrell, Henningsen, Kling, Millan and Wiese, the
Severance Period is 24 months; for Messrs. Gibbs and Schumacher and Ms. Smith,
the Severance Period is 18 months. The Pre-Acquisition Agreement provides that
the Offeror shall honor and comply with the terms of any existing executive
termination agreements.
Under certain of the Company's annual and long term incentive plans, a
change in control of the Company such as will result from the consummation of
the Offer also will result in the acceleration of benefits thereunder to the
Company's senior officers.
The Company, in consultation with UTC, has also adopted an incremental bonus
plan for certain senior officers in respect of services to be provided by such
officers in connection with the transition of the Company's ownership to the
Offeror. The bonus plan will provide for bonuses to be paid by the Company
within 60 to 90 days after the consummation of the Offer and will involve
aggregate payments of approximately $1 million. With the exception of Mr.
Clevy, who is proposed to receive $500,000, the participants and the amounts
to be paid to the participating officers have not yet been determined;
however, the Company and UTC intend to consult with each other in respect of
the details of the plan.
MATERIAL CHANGES IN THE AFFAIRS OF THE COMPANY
To the knowledge of the directors and senior officers of the Company, after
reasonable inquiry, other than the announcement of the Offer there has been no
material change in the affairs or prospects of the Company since the date of
the publication of its last financial statements, being the interim unaudited
financial statements of the Company for the first quarter ended March 31,
1999, and there is no information contained in such financial statements which
is materially misleading because of events subsequent to their publication or
any other information which has not been generally disclosed to the public
which would reasonably be expected to affect the decision of the shareholders
to accept or reject the Offer.
On June 25, 1999, Stanley Ginkowski and Jeff Grau filed a class action
lawsuit in the Chancery Court of Marshall County, Tennessee, naming as
defendants the Company and all of the directors of the Company. The plaintiffs
seek to enjoin any actions by the Company in furtherance of the Offer or,
alternatively, to recover damages in the event the Offer and any subsequent
merger is consummated. The plaintiffs claim that the consideration to be
received by shareholders in the proposed transaction with UTC and the Offeror
is unfair and inadequate, that the Company's directors breached certain
alleged fiduciary duties to the Company's shareholders and that the Company's
directors will be unjustly enriched by the transaction. The Company believes
the claims against the Company and its directors are without merit and intends
to vigorously defend all claims made against them. The Company and UTC do not
anticipate that the suit will have any effect on their plans to proceed with
the proposed transaction.
RESPONSE OF THE COMPANY
There is no transaction, board resolution, agreement in principle or signed
contract of the Company, other than as described herein, which has occurred in
response to the Offer. No negotiations are underway in response to the Offer
which relate to or would result in (i) an extraordinary transaction such as a
merger or reorganization involving the Company or a subsidiary, (ii) the
purchase, sale or transfer of a material amount of assets by the Company or a
subsidiary, (iii) an issuer bid or other acquisition of securities by or of
the Company; or (iv) any material change in the capitalization or dividend
policy of the Company, except in each case as disclosed in the Offer.
20
<PAGE>
STATUTORY RIGHTS
Securities legislation in certain of the provinces and territories of Canada
provides holders of the Shares with, in addition to any other rights they may
have at law, rights of rescission or to damages, or both, if there is a
misrepresentation in a circular or a notice that is required to be delivered
to the holders of the Shares. However, such rights must be exercised within
prescribed time limits. Holders of the Shares should refer to the applicable
provisions of the securities legislation of their province or territory for
particulars of those rights or consult with a lawyer.
APPROVAL OF THE DIRECTORS' CIRCULAR
The contents of this Directors' Circular have been approved, and the
delivery of this Directors' Circular has been authorized, by the Board.
21
<PAGE>
CONSENT
To: The Board of Directors of International Comfort Products Corporation
We hereby consent to the discussion of and to all references to our Fairness
Opinion dated June 23, 1999 in the Directors' Circular of International
Comfort Products Corporation dated June 30, 1999 and we consent to the
inclusion of such Fairness Opinion as Appendix A to that Directors' Circular.
(signed) Credit Suisse First Boston
Corporation
New York, New York
June 30, 1999
22
<PAGE>
CERTIFICATE
Dated: June 30, 1999
The foregoing contains no untrue statement of a material fact and does not
omit to state a material fact that is required to be stated or that is
necessary to make a statement not misleading in light of the circumstances in
which it is made. The foregoing does not contain any misrepresentation likely
to affect the value or the market price of the securities subject to the Offer
within the meaning of the Securities Act (Quebec).
On behalf of the Board of Directors
(signed) Richard W. Snyder (signed) Stanley M. Beck, Q.C.
Director Director
23
<PAGE>
[LOGO] CREDIT SUISSE FIRST BOSTON CORPORATION
Eleven Madison Avenue Telephone 212 325 2000
New York, NY 10010-3629
APPENDIX A
June 23, 1999
Board of Directors
International Comfort Products Corporation
501 Corporate Centre Drive, Suite 200
Franklin, Tennessee 37067
Members of the Board:
You have asked us to advise you with respect to the fairness to the
shareholders of International Comfort Products Corporation (the "Company")
from a financial point of view of the consideration to be received by such
shareholders pursuant to the terms of the Pre-acquisition Agreement (the "Pre-
acquisition Agreement") among the Company, United Technologies Corporation
(the "Acquiror") and Titan Acquisitions, Ltd., a wholly owned subsidiary of
the Acquiror ("Acquisition Subsidiary"). The Pre-acquisition Agreement
provides, among other things, for (i) the commencement by Acquisition
Subsidiary of a tender offer (the "Tender Offer") for all outstanding ordinary
shares of the Company (the "Shares") at a purchase price of $11.75 per Share
in cash and (ii) the consummation of a Second Stage Transaction (as defined in
the Pre-Acquisition Agreement) in which all remaining Shares will be acquired
for not less than $11.75 per Share in cash.
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to the Company, as well as a draft
dated June 23, 1999 of the Pre-acquisition Agreement. We have also reviewed
certain other information, including financial forecasts, provided to us by
the Company and have met with the management of the Company to discuss the
business and prospects of the Company. We have also considered certain
financial and stock market data of the Company, and we have compared that data
with similar data for other publicly held companies in businesses similar to
those of the Company and we have considered the financial terms of certain
other business combinations and other transactions which recently have been
effected. We have also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria which
we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied
on its being complete and accurate in all material respects. With respect to
the financial forecasts, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the Company's management as to the future financial performance
of the Company. In addition, we have not been requested to make, and have not
made, an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of the Company, nor have we been furnished with any
such evaluations or appraisals. Our opinion is necessarily based upon
financial, economic, market and other conditions as they exist and can be
evaluated on the date hereof. In connection with our engagement, we approached
third parties to solicit indications of interest in a possible acquisition of
the Company and held preliminary discussions with certain of these parties
prior to the date hereof.
We have acted as financial advisor to the Board of Directors of the Company
in connection with the Tender Offer and the Second Stage Transaction and will
receive a fee for our services, a significant portion of which is contingent
upon the consummation of the Tender Offer. In the past, we have performed, and
may from time to time perform, investment banking services for the Company and
the Acquiror, and have received customary fees for such services. In the
ordinary course of our business, we and our affiliates may actively trade the
debt and equity securities of both the Company and the Acquiror for our own
accounts and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.
<PAGE>
It is understood that this letter is for the information of Board of
Directors of the Company in connection with its consideration of the Tender
Offer and the Second Stage Transaction and does not constitute a
recommendation to any shareholder of the Company as to whether or not such
shareholder should tender its Shares pursuant to the Tender Offer or vote its
Shares in favor of any Second Stage Transaction. This letter is not to be
quoted or referred to, in whole or in part, in any registration statement,
prospectus or proxy statement, or in any other document used in connection
with the offering or sale of securities, nor shall this letter be used for any
other purposes, without our prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the consideration to be received by the shareholders of the
Company in the Tender Offer and the Second Stage Transaction is fair to such
shareholders from a financial point of view.
Very truly yours,
(Signed) CREDIT SUISSE FIRST BOSTON CORPORATION
A-2
<PAGE>
EXHIBIT 7
TITAN ACQUISITIONS, LTD.
June 23, 1999
Ravine Partners, Ltd.
3219 McKinney Avenue
Dallas, TX 75204
Dear Sirs:
Reference is made to the Pre-Acquisition Agreement dated June 23, 1999 (the
"Pre-Acquisition Agreement") between Titan Acquisitions, Ltd. (the "Offeror"),
United Technologies Corporation ("Parent") and International Comfort Products
Corporation ("ICP") pursuant to which the Offeror has agreed to make an offer to
purchase all of the outstanding shares (the "Shares") of ICP. All capitalized
terms referred herein and not otherwise defined herein shall have the meanings
attributed thereto in the Pre-Acquisition Agreement.
The Offeror understands, and by your acceptance of this letter agreement
(the "Agreement") you (the "Seller") represent and warrant to the Offeror that,
there are 7,889,870 Shares beneficially owned, directly or indirectly, by the
Seller or over which the Seller exercises direction or control (collectively,
the "Seller's Shares").
This Agreement sets out the terms and conditions by which the Seller
irrevocably and unconditionally agrees to deposit the Seller's Shares under the
Offer, grants an Option over the Seller's Shares to the Offeror and sets out the
obligations and commitments of the Seller in connection therewith. This
Agreement is also the Seller's agreement to ensure that the Seller's associates
(as defined in the Securities Act (Ontario)) are bound by and perform the
obligations of the Seller hereunder, and any reference to the Seller in this
Agreement shall include the Seller's associates, all to the extent applicable.
Section 1. Acceptance of the Offer
1.1 Deposit. The Seller hereby irrevocably and unconditionally agrees to
-------
deposit the Seller's Shares, together with a completed and executed
letter of transmittal, under the Offer prior to the Initial Expiry Time.
1.2 Non-Withdrawal. The Seller hereby irrevocably and unconditionally
--------------
agrees not to withdraw or take any action to withdraw any portion of the
Seller's Shares following their deposit under the Offer, notwithstanding
any statutory rights or other rights under the terms of the Offer or
otherwise which the Seller might have, unless the Pre-Acquisition
Agreement is terminated in accordance with its terms prior to the taking
up of the Seller's Shares under the Offer.
<PAGE>
Section 2 Option
2.1 Grant of Option. On the terms and subject to the conditions set forth
---------------
herein, the Seller hereby grants to Offeror an irrevocable option (the
"Option") to purchase all of the right, title and interest of the Seller
in and to the Seller's Shares at a price equal to the greater of (a)
US$11.75 per share and (b) any higher price per share paid by the
Offeror in the Offer.
2.2 Exercise of the Option. Offeror may exercise the Option in accordance
----------------------
with the terms of Section 2.1 hereof in whole, but not in part, if, but
only if, the fee provided for in Section 11.2(b), (d) or (e) of the Pre-
Acquisition Agreement has become payable to Offeror in accordance with
the terms thereof. Offeror may exercise the Option at any time within
the 60 days following the date when the Option first becomes
exercisable.
In the event that Offeror is entitled to and wishes to exercise the
Option, Offeror shall send a written notice to the Seller (the "Notice"
and the date on which the Notice is sent shall be referred to herein as
the "Notice Date") specifying the place and the date (the "Closing
Date") promptly after the Notice Date for the closing of such purchase
(the "Closing"); provided, however, that in the event that prior
-------- -------
notification to, or approval of, any regulatory or antitrust agency is
required in connection with the exercise of the Option, Offeror shall
promptly file the required notice or application for approval and shall
promptly notify the Company of such filing, and the period of time that
otherwise would run pursuant to this Section 2.2 shall run instead from
the last the date on which all required notification or waiting periods
shall have expired or been terminated or all required approvals shall
have been obtained; provided further that in the event there shall be in
-------- -------
effect any preliminary or final injunction or other order issued by any
court or governmental, administrative or regulatory agency or authority
prohibiting the exercise of the Option pursuant to this Agreement, the
period of time that otherwise would run pursuant to this Section 2.2
shall run instead from the date on which such prohibition shall have
been vacated, terminated or waived. Any exercise of the Option shall be
deemed to have occurred on the Notice Date relating thereto.
2.3 Closing. At the Closing, simultaneously with the payment by Offeror of
-------
the purchase price for the Seller's Shares, the Seller shall deliver, or
cause to be delivered, to Offeror certificates representing the Seller's
Shares duly endorsed to Offeror or accompanied by stock powers duly
executed by the Seller in blank, together with any necessary stock
transfer stamps properly affixed.
2.4 Acquired Option Shares. In the event the Seller's Shares are acquired
----------------------
by Offeror pursuant to the exercise of the Option (the "Acquired Option
---------------
Shares") and Offeror subsequently disposes of, sells or transfers the
Acquired Option Shares in connection with any Take-over Proposal for
which a binding contract of sale is executed within 12 months of the
Closing (a "Sale"), the Seller shall be entitled to receive an amount
----
in cash equal to 75% of the excess, if any, of the aggregate proceeds
received by
2
<PAGE>
Offeror in such Sale (net of selling commissions, if any) over the
aggregate purchase price paid by Offeror for the Acquired Option Shares
subject to such Sale.
If any of the consideration received by Offeror in a Sale consists of
securities, for purposes hereof, the proceeds of such Sale shall be
deemed to be the net after-tax amount that would actually have been
received by Offeror in an orderly sale of such securities commencing on
the first business day following actual receipt of such securities by
Offeror, in the written opinion of an investment banking firm of
national reputation selected by Offeror and reasonably satisfactory to
the Seller.
Any payment due to the Seller pursuant to this Section 2.4 shall be paid
by Offeror to the Seller within three Business Days following receipt by
Offeror of the Sale proceeds or, if any of such consideration consists
of securities, within three Business Days after receipt of the Sale
proceeds or, if later, the date on which the investment banking firm's
written opinion is received by Offeror.
Nothing herein shall create any duty by Offeror to engage in a Sale of
the Acquired Option Shares.
Section 3 Representations and Warranties
3.1 Representations and Warranties of Seller. The Seller hereby
----------------------------------------
represents and warrants to and in favour of the Offeror that:
(a) the Seller is a limited partnership duly organized and validly
existing under the laws of the State of Texas;
(b) the Seller has the power and capacity and has received all requisite
approvals to enter into this Agreement and to perform its
obligations hereunder and this Agreement is a valid and binding
agreement enforceable by the Offeror against the Seller in
accordance with its terms;
(c) the Seller is (and, if applicable, upon the deposit of the Seller's
Shares under the Offer, will be) the sole legal and beneficial owner
of the Seller's Shares and has and will have the exclusive right to
dispose of the Seller's Shares as provided in this Agreement;
(d) the Seller's Shares are owned (and, if applicable, will be acquired
by the Offeror) with good and marketable title, free and clear of
any and all mortgages, liens, charges, encumbrances and adverse
claims;
(e) no person, firm or corporation has any agreement or option, or any
right or privilege (whether by law, pre-emptive or contractual)
capable of becoming an agreement or option, for the purchase,
acquisition or transfer of any of the Seller's Shares or any
interest therein or right thereto, except pursuant to this
Agreement; and
3
<PAGE>
(f) the execution and delivery of this Agreement and the fulfilment of
the terms hereof by the Seller do not and will not result in a
breach of any agreement or instrument to which the Seller is a party
or by which the Seller is contractually bound.
3.2 Representations and Warranties of the Offeror. The Offeror hereby
---------------------------------------------
represents and warrants to the Seller that:
(a) the Offeror is a corporation duly incorporated and validly existing
under the laws of its jurisdiction of incorporation;
(b) the Offeror has the financial resources and is financially capable
of completing the Offer; and
(c) the Offeror has the corporate power and capacity and has received
all requisite approvals to enter into this Agreement and this
Agreement is a valid and binding agreement enforceable by the Seller
against the Offeror in accordance with its terms.
Section 4 Covenants of the Seller
4.1 General. The Seller hereby covenants that during the term of this
-------
Agreement the Seller will:
(a) not take any action to solicit, initiate or encourage enquiries,
submissions, proposals or offers from, or provide information to,
any other person, entity or group relating to, and will not
participate in any negotiations regarding, or otherwise cooperate in
any way with or assist or participate in:
(i) the direct or indirect acquisition or disposition of all or any
Shares or any other securities of ICP or its subsidiaries
(except as expressly provided in this Agreement); or
(ii) except as expressly permitted by this Agreement or as
previously approved in writing by the Offeror, any
amalgamation, merger, sale of any material part of ICP's or its
subsidiaries' assets, take-over bid, plan of arrangement,
reorganization, recapitalization, liquidation or winding-up of,
or other business combination or similar transaction involving
ICP or any of its subsidiaries;
(b) not sell, assign, convey or otherwise dispose of any of the
Seller's Shares except pursuant to and in accordance with this
Agreement;
(c) not exercise any shareholder rights or remedies available at common
law or pursuant to applicable corporate and securities laws to
delay, hinder, upset or challenge the Offer;
4
<PAGE>
(d) cause the voting rights attaching to the Seller's Shares to be
exercised to oppose any proposed action by ICP, its shareholders or
others:
(i) which might reasonably be regarded as being directed towards
or likely to prevent or delay the successful completion of the
Offer; or
(ii) to materially change the business, assets, operations,
capital, affairs, financial conditions, licences, permits,
rights or privileges, whether contractual or otherwise, or
prospects of ICP which in the sole judgement of the Offeror
could individually, or in the aggregate, materially adversely
affect the value of the Shares to the Offeror;
(e) use Seller's reasonable efforts to assist the Offeror to
successfully complete the acquisition of Shares; and
(f) promptly notify the Offeror upon any of Seller's representations or
warranties contained in this Agreement becoming untrue or incorrect
in any material respect during the period commencing on the date
hereof and expiring at the time of expiry of the Offer, and for the
purposes of this provision, each representation and warranty shall
be deemed to be given at and as of all times during such period
(irrespective of any language which suggests that it is only being
given as at the date hereof).
The Seller shall not be deemed to have violated Section 4.1(a) and (e)
solely as a result of the participation by any associate of the Seller
who is a director of ICP in a decision by the Board of Directors of ICP
to provide information to any person, entity or group subject to and in
accordance with Section 8.1 of the Pre-Acquisition Agreement.
4.2 Resignation as Director. The Seller shall upon request use all
-----------------------
reasonable efforts to cause any of its associates who may be directors
of ICP to resign effective at the time and in the manner requested by
the Offeror following the purchase of the Seller's Shares by the Offeror
under the Offer.
Section 5 Covenants of the Offeror
5.1 Completion of the Offer. Subject to the terms and conditions hereof,
-----------------------
the Offeror hereby covenants to use its reasonable commercial efforts to
successfully complete the Offer, including diligently pursuing all
requisite regulatory approvals, subject to the limitations in Section
10.4(b) of the Pre-Acquisition Agreement.
Section 6 Termination
6.1 Termination. If the Option is not exercised in accordance with the
-----------
terms and conditions of Section 2.2, then, from and after the last date
on which the Option is or may become exercisable pursuant to Section
2.2, no party hereto shall have any rights or obligations hereunder and
this Agreement shall terminate and become null and void.
5
<PAGE>
In the event of such termination of this Agreement, the Seller may
withdraw all of the Seller's Shares deposited in accordance with the
terms and conditions of the Offer, this Agreement shall forthwith be of
no further force and effect and there shall be no liability on the part
of either Seller or the Offeror, except to the extent that either such
party is in default of its obligations herein contained.
Section 7 General
7.1 Disclosure. Prior to the first public disclosure of the existence and
----------
terms and conditions of this Agreement, none of the parties hereto shall
disclose the existence of this Agreement, or any details hereof, to any
person other than ICP, its directors and officers, without the prior
written consent of the other party hereto, except to the extent required
by law including applicable securities laws. The existence and terms and
conditions of this Agreement may be disclosed by the Offeror and ICP in
press releases issued in connection with the execution of the Pre-
Acquisition Agreement, in the Offer Documents and in the directors
circular prepared by ICP.
7.2 Assignment. The Offeror may assign all or any part of its rights and/or
----------
obligations under this Agreement to a wholly-owned subsidiary of the
Parent, but, if such assignment takes place, the Offeror shall continue
to be liable to Seller for any default in performance by the assignee.
This Agreement shall not otherwise be assignable by any party without
the consent of the other.
7.3 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Province of Ontario and of Canada
applicable therein.
7.4 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties made by the Offeror and the Seller herein shall expire
immediately following the Closing. No investigations made by or on
behalf of the Offeror or any of its authorized agents at any time shall
have the effect of waiving, diminishing the scope of or otherwise
affecting any representation, warranty or covenant made by the Seller
herein or pursuant hereto.
7.5 Amendments. This Agreement may not be amended except by written
----------
agreement signed by the parties to this Agreement.
7.6 Specific Performance and other Equitable Rights. Each of the parties
-----------------------------------------------
recognizes and acknowledges that this Agreement is an integral part of
the Offer, that the Offeror would not contemplate causing the Offer to
be made unless this Agreement was executed, and that a breach by any
party of any covenants or other commitments contained in this Agreement
will cause the other party to sustain injury for which it would not have
an adequate remedy at law for money damages. Therefore, each of the
parties agrees that in the event of any such breach, the aggrieved party
shall be entitled to the remedy of specific performance of such
covenants or commitments and preliminary and permanent injunctive and
other equitable relief in addition to any other remedy to which it or
they may be entitled, at law or in equity, and the parties
6
<PAGE>
further agree to waive any requirement for the securing or posting of
any bond in connection with the obtaining of any such injunctive or
other equitable relief.
7.7 Expenses. The Offeror and the Seller shall each pay its legal,
--------
financial advisory and accounting costs and expenses incurred in
connection with the preparation, execution and delivery of this
Agreement and all documents and instruments executed or prepared
pursuant to this Agreement and any other costs and expenses whatsoever
and howsoever incurred, and none of such costs and expenses shall be
borne by ICP.
7.8 Counterparts. This Agreement may be executed in one or more
------------
counterparts which together shall be deemed to constitute one valid and
binding agreement, and delivery of the counterparts may be effected by
means of a telecopier transmission.
7.9 Entire Agreement. This Agreement constitutes the entire agreement and
----------------
understanding between the parties pertaining to the subject matter of
this Agreement.
7.10 Time. Time shall be of the essence of this Agreement.
----
7.11 Notices. Any notice, request, consent, agreement or approval which
-------
may or is required to be given pursuant to this Agreement shall be in
writing and shall be sufficiently given or made if delivered, or sent by
telecopier, in the case of:
(a) The Offeror addressed as follows:
United Technologies Corporation
One Financial Plaza
Hartford, CT 06101
Attention: Ari Bousbib
Telecopier No.: 860-728-6355
United Technologies Corporation
One Financial Plaza
Hartford, CT 06101
Attention: General Counsel
Telecopier No.: 860-728-7862
(b) The Seller, addressed as follows:
Snyder Capital Corporation
3219 McKinney Avenue
Dallas, Texas 75240
Attn: Richard Snyder
Telecopier No.: 214-754-0350
7
<PAGE>
or to such other address as the relevant party may from time to time advise
by notice in wiring given pursuant to this Section 7.11. The date of
receipt of any such notice, request, consent, agreement or approval shall
be deemed to be the date of delivery or sending thereof.
(Intentionally Blank)
8
<PAGE>
If the terms and conditions of this Agreement are acceptable to you, please so
indicate by executing and returning the enclosed copy hereof and the attached
resignation to the undersigned prior to 11:59 p.m. (Toronto time) on June 23,
1999, failing which this letter shall be null and void.
Yours truly,
TITAN ACQUISITIONS, LTD.
By: /s/ Ari Bousbib
---------------------------
(Acceptance on following page)
<PAGE>
ACCEPTANCE
Agreed and accepted this 23rd day of June, 1999.
/s/ Robert Lloyd Snyder
- -----------------------
Robert Lloyd Snyder
Attorney-in-Fact for Ravine Partners, Ltd.
POWER OF ATTORNEY
-----------------
We, Richard W. Snyder and Roberta M. Snyder, both domiciliaries and residents of
Dallas County, Texas and the General Partners of Ravine Partners, Ltd., a Texas
limited partnership, do hereby appoint Robert Lloyd Snyder, also of Dallas
County, Texas as true and lawful attorney-in-fact on behalf of Ravine Partners,
Ltd. with authority to negotiate and execute on its behalf the letter agreement,
dated June 23, 1999, between Ravine Partners, Ltd. And Titan Acquisitions, Ltd.
IN WITNESS WHEREOF, we hereunto have set our hands this 23rd day of June, 1999.
/s/ Richard W. Snyder
---------------------
Richard W. Snyder
General Partner - Ravine Partners, Ltd.
/s/ Roberta M. Snyder
---------------------
Roberta M. Snyder
General Partner - Ravine Partners, Ltd.
Acknowledgment
--------------
STATE OF TEXAS
Before me, this 23rd day of June, 1999, personally appeared Robert Lloyd Snyder,
Richard W. Snyder and Roberta M. Snyder, known to me to be the persons whose
names are subscribed to the foregoing instrument and acknowledged to me that
they executed the same for the purposes and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 23rd day of June, 1999.
/s/ Vicki A. Bolton
-------------------
/s/ [Seal] VICKI A. BOLTON Notary Public in and for The State of Texas
NOTARY PUBLIC
State of Texas My commission expires: 10/3/99
Comm. Exp. 10-03-99 -------
<PAGE>
EXHIBIT 8
TITAN ACQUISITIONS, LTD.
June 23, 1999
Ontario Teachers' Pension Plan Board
5650 Yonge Street
Toronto, Ontario
M2M 4H5
Attention: Portfolio Manager Merchant Banking
Dear Sirs:
Reference is made to the Pre-Acquisition Agreement dated June 23, 1999 (the
"Pre-Acquisition Agreement") between Titan Acquisitions, Ltd. (the "Offeror"),
United Technologies Corporation ("Parent") and International Comfort Products
Corporation (the "Corporation") pursuant to which the Offeror has agreed to make
an offer to purchase all of the outstanding shares (the "Shares") of the
Corporation. All capitalized terms referred herein and not otherwise defined
herein shall have the meanings attributed thereto in the Pre-Acquisition
Agreement.
The Offeror understands, and by your acceptance of this letter agreement
(the "Agreement") you (the "Seller") represent and warrant to the Offeror that
7,919,638 Shares are beneficially owned, directly or indirectly, by the Seller
or over which the Seller exercises direction or control (collectively, the
"Seller's Shares").
This Agreement sets out the terms and conditions by which the Seller
irrevocably and unconditionally agrees to deposit the Seller's Shares under the
Offer, and sets out the obligations and commitments of the Seller in connection
therewith. This Agreement is also the Seller's agreement to ensure that the
Seller's associates (as defined in the Securities Act (Ontario)) are bound by
and perform the obligations of the Seller hereunder, and any reference to the
Seller in this Agreement shall include the Seller's associates, all to the
extent applicable.
<PAGE>
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Section 1 Acceptance
1.1 Deposit. Subject to the terms and conditions hereof, the Seller hereby
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irrevocably and unconditionally agrees to deposit the Seller's Shares,
together with a completed and executed letter of transmittal, under the
Offer prior to the Initial Expiry Time.
1.2 Non-Withdrawal. The Seller hereby irrevocably and unconditionally agrees
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not to withdraw or take any action to withdraw any portion of the Seller's
Shares following their deposit under the Offer, notwithstanding any
statutory rights or other rights under the terms of the Offer or otherwise
which the Seller might have, except pursuant to Section 1.3 or unless this
Agreement is terminated in accordance with its terms prior to the taking up
of the Seller's Shares under the Offer.
1.3 Superior Take-over Proposal. If a third party has made a bona fide offer
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for all of the Shares of the Corporation which offer constitutes a Superior
Take-over Proposal (as defined in the Pre-Acquisition Agreement), then the
Seller shall not be required to deposit the Seller's Shares pursuant to the
Offer or may withdraw the Seller's Shares deposited pursuant to the Offer,
as the case may be.
Section 2 Representations and Warranties
2.1 Representations and Warranties of Seller. The Seller hereby represents and
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warrants to and in favour of the Offeror that:
(a) the Seller is a non-share capital corporation duly incorporated and
validly existing under the laws of the Province of Ontario;
(b) the Seller has the power and capacity and has received all requisite
approvals to enter into this Agreement and to perform its obligations
hereunder and this Agreement is a valid and binding agreement
enforceable by the Offeror against the Seller in accordance with its
terms;
(c) the Seller is (and, if applicable, upon the deposit of the Seller's
Shares under the Offer, will be) the sole legal and beneficial owner
of the Seller's Shares and has and will have the exclusive right to
dispose of the Seller's Shares as provided in this Agreement;
(d) the Seller's Shares are owned (and, if applicable, will be acquired by
the Offeror) with good and marketable title, free and clear of any and
all mortgages, liens, charges, encumbrances and adverse claims; and
<PAGE>
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(e) no person, firm or corporation has any agreement or option, or any
right or privilege (whether by law, pre-emptive or contractual)
capable of becoming an agreement or option, for the purchase,
acquisition or transfer of any of the Seller's Shares or any interest
therein or right thereto, except pursuant to this Agreement.
2.2 Representations and Warranties of the Offeror. The Offeror hereby
---------------------------------------------
represents and warrants to the Seller that:
(a) the Offeror is a corporation duly incorporated and validly existing
under the laws of its jurisdiction of incorporation;
(b) the Offeror has the financial resources and is financially capable of
completing the Offer; and
(c) the Offeror has the corporate power and capacity and has received all
requisite approvals to enter into this Agreement and this Agreement is
a valid and binding agreement enforceable by the Seller against the
Offeror in accordance with its terms.
Section 3 Covenants of the Seller
3.1 General. The Seller hereby covenants that during the term of this
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Agreement the Seller will:
(a) not take any action to solicit, initiate or encourage enquiries,
submissions, proposals or offers from, or provide information to, any
other person, entity or group relating to, and will not participate in
any negotiations regarding, or otherwise cooperate in any way with or
assist or participate in:
(i) the direct or indirect acquisition or disposition of all or any
Shares or any other securities of the Corporation or its
subsidiaries (except as expressly provided in this Agreement);
or
(ii) except as expressly permitted by this Agreement or as previously
approved in writing by the Offeror, any amalgamation, merger,
sale of any material part of the Corporation's or its
subsidiaries' assets, take-over bid, plan of arrangement,
reorganization, recapitalization, liquidation or winding-up of,
or other business combination or similar transaction involving
the Corporation or any of its subsidiaries;
(b) not sell, assign, convey or otherwise dispose of any of the Seller's
Shares except pursuant to and in accordance with this Agreement;
<PAGE>
-4-
(c) cause the voting rights attaching to the Seller's Shares to be
exercised to oppose any proposed action by the Corporation, its
shareholders or others:
(i) which might reasonably be regarded as being directed towards or
likely to prevent or delay the successful completion of the
Offer (other than as contemplated in Section 1.3 hereof); or
(ii) to materially change the business, assets, operations, capital,
affairs, financial conditions, licences, permits, rights or
privileges, whether contractual or otherwise, or prospects of
the Corporation which in the sole judgement of the Offeror could
individually, or in the aggregate, materially adversely affect
the value of the Shares to the Offeror; and
(d) promptly notify the Offeror upon any of Seller's representations or
warranties contained in this Agreement becoming untrue or incorrect in
any material respect during the period commencing on the date hereof
and expiring at the time of expiry of the Offer.
The Seller shall not be deemed to have violated Section 4.1(a) solely as a
result of the participation by any associate or nominee of the Seller who
is a director of the Corporation in a decision by the Board of Directors of
the Corporation to provide information to any person, entity or group in
accordance with Sections 2.2(c), 8.1(c) and 8.1(d) of the Pre-Acquisition
Agreement.
3.2 Resignation as Director. The Seller shall upon request use all reasonable
-----------------------
efforts to cause any of its associates or nominees who may be directors of
the Corporation to resign effective at the time and in the manner requested
by the Offeror following the purchase of the Seller's Shares by the Offeror
under the Offer.
Section 4 Covenants of the Offeror
4.1 Offeror. Subject to the terms and conditions hereof, the Offeror hereby
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covenants to use its reasonable commercial efforts to successfully complete
the Offer, including diligently pursuing all requisite regulatory
approvals, subject to the limitations in Section 10.4(b) of the Pre-
Acquisition Agreement.
Section 5 Termination by the Seller
5.1 Termination. Seller, when not in default in performance of Seller's
-----------
obligations under this Agreement, may, without prejudice to any other
rights, terminate Seller's obligations under this Agreement by notice to
the Offeror on the earlier of: (i) an occurrence of the event referred to
in Section 1.3
<PAGE>
-5-
hereof; (ii) the Pre-Acquisition Agreement is terminated in accordance with
its terms; and (iii) December 15, 1999.
In the event of such termination of this Agreement, the Seller may withdraw
all of the Seller's Shares deposited in accordance with the terms and
conditions of the Offer, this Agreement shall forthwith be of no further
force and effect and there shall be no liability on the part of either
Seller or the Offeror, except to the extent that either such party is in
default of its obligations herein contained.
Section 6 General
6.1 Disclosure. Prior to the first public disclosure of the existence and
----------
terms and conditions of this Agreement, none of the parties hereto shall
disclose the existence of this Agreement, or any details hereof, to any
person other than the Corporation, its directors and officers, without the
prior written consent of the other party hereto, except to the extent
required by law including applicable securities laws. The existence and
terms and conditions of this Agreement may be disclosed by the Offeror and
the Corporation in press releases issued in connection with the execution
of the Pre-Acquisition Agreement, in the Offer Documents and in the
directors circular prepared by the Corporation.
6.2 Assignment. The Offeror may assign all or any part of its rights and/or
----------
obligations under this Agreement to a wholly-owned subsidiary of the
Parent, but, if such assignment takes place, the Offeror shall continue to
be liable to Seller for any default in performance by the assignee. This
Agreement shall not otherwise be assignable by any party without the
consent of the other.
6.3 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Province of Ontario and of Canada
applicable therein.
6.4 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties made by the Offeror and the Seller herein shall expire
immediately following the Closing. No investigations made by or on behalf
of the Offeror or any of its authorized agents at any time shall have the
effect of waiving, diminishing the scope of or otherwise affecting any
representation, warranty or covenant made by the Seller herein or pursuant
hereto.
<PAGE>
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6.5 Amendments. This Agreement may not be amended except by written agreement
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signed by the parties to this Agreement.
6.6 Specific Performance and other Equitable Rights. Each of the parties
-----------------------------------------------
recognizes and acknowledges that this Agreement is an integral part of the
Offer, that the Offeror would not contemplate causing the Offer to be made
unless this Agreement was executed, and that a breach by any party of any
covenants or other commitments contained in this Agreement will cause the
other party to sustain injury for which it would not have an adequate
remedy at law for money damages. Therefore, each of the parties agrees
that in the event of any such breach, the aggrieved party shall be
entitled to the remedy of specific performance of such covenants or
commitments and preliminary and permanent injunctive and other equitable
relief in addition to any other remedy to which it or they may be
entitled, at law or in equity, and the parties further agree to waive any
requirement for the securing or posting of any bond in connection with the
obtaining of any such injunctive or other equitable relief.
6.7 Expenses. The Offeror and the Seller shall each pay its legal, financial
--------
advisory and accounting costs and expenses incurred in connection with the
preparation, execution and delivery of this Agreement and all documents
and instruments executed or prepared pursuant to this Agreement and any
other costs and expenses whatsoever and howsoever incurred, and none of
such costs and expenses shall be borne by the Corporation.
6.8 Counterparts. This Agreement may be executed in one or more counterparts
------------
which together shall be deemed to constitute one valid and binding
agreement, and delivery of the counterparts may be effected by means of a
telecopier transmission.
6.9 Entire Agreement. This Agreement constitutes the entire agreement and
----------------
understanding between the parties pertaining to the subject matter of this
Agreement.
6.10 Time. Time shall be of the essence of this Agreement.
----
6.11 Notices. Any notice, request, consent, agreement or approval which may or
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is required to be given pursuant to this Agreement shall be in writing and
shall be sufficiently given or made if delivered, or sent by telecopier,
in the case of:
<PAGE>
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(a) The Offeror addressed as follows:
United Technologies Corporation
One Financial Plaza
Hartford, CT 06101
Attention: Ari Bousbib
Telecopier No.: (860) 728-6355
United Technologies Corporation
One Financial Plaza
Hartford, CT 06101
Attention: General Counsel
Telecopier No.: (860) 728-7862
(b) The Seller, addressed as follows:
Ontario Teachers' Pension Plan Board
5650 Yonge Street
Toronto, Ontario
M2M 4H5
Attention: Portfolio Manager Merchant Banking
Telecopier No.: (416) 730-5374
or to such other address as the relevant party may from time to time advise
by notice in writing given pursuant to this section 6.11. The date of
receipt of any such notice, request, consent, agreement or approval shall
be deemed to be the date of delivery or sending thereof.
<PAGE>
If the terms and conditions of this Agreement are acceptable to you, please so
indicate by executing and returning the enclosed copy hereof to the undersigned
prior to 11:59 p.m. (Toronto time) on June 23, 1999, failing which this letter
shall be null and void.
Yours truly,
TITAN ACQUISITIONS, LTD.
By: /s/ Ari Bousbib
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(Acceptance on following page)
<PAGE>
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ACCEPTANCE
Agreed and accepted this 23rd day of June, 1999.
ONTARIO TEACHERS' PENSION PLAN BOARD
By: /s/ Roy T. Graydon
--------------------------
